VZCZCXRO2524
PP RUEHROV
DE RUEHJM #1943 2971505
ZNY CCCCC ZZH
P 231505Z OCT 08
FM AMCONSUL JERUSALEM
TO RUEHC/SECSTATE WASHDC PRIORITY 3080
INFO RUEHXK/ARAB ISRAELI COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY C O N F I D E N T I A L JERUSALEM 001943 
 
SIPDIS 
 
NEA/IPA FOR HOLMSTROM/SACHAR/LENTZ; EEB/IFD/OIA FOR 
CULLINANE; R FOR MCDANIEL; TREASURY FOR AHERN 
DEPT PLEASE PASS TO OPIC FOR VP ROBERT DRUMHELLER 
 
E.O. 12958: DECL: 10/21/2018 
TAGS:          
SUBJECT: OPIC'S PLAN FOR AFFORDABLE MORTGAGES IN THE WEST 
BANK 
 
REF: JERUSALEM 350 
 
Classified By: Consul General Jake Walles, for reasons 1.4b and d 
 
 1. (SBU) Summary: Following positive meetings with 
Palestinian and international partners on October 19-21, 
Overseas Private Investment Corporation (OPIC) VP Robert 
Drumheller reports solid progress on the affordable mortgage 
finance initiative, announced by President Abbas and OPIC CEO 
Mosbacher on April 14.  OPIC is on track to have the project 
operational as planned by mid-2009, to complement two 
large-scale housing/community projects in the West Bank.  End 
summary. 
 
 2. (SBU) OPIC VP Robert Drumheller and Investment Analyst 
Maria Goravanchi visited Jerusalem and Ramallah October 19-21 
to continue work on a USD 515 million mortgage finance 
facility.  OPIC's partners include the International Finance 
Corporation (IFC), the Palestine Investment Fund (PIF), Bank 
of Palestine (BOP), Cairo Amman Bank, and the UK's Department 
for International Development (DFID) (reftel).  The 
participating organizations will create the Affordable 
Mortgage and Loan Corporation (AMAL).  AMAL will generate the 
loans, but remain invisible at the retail level, and the BOP 
and Cairo Amman Bank will interface directly with customers. 
AMAL will offer Palestinians two products: a 25-year fixed 
rate loan, and 25-year adjustable rate loan which resets 
every five years. 
 
 3. (SBU) OPIC plans to issue the first loan in 2009 to 
coincide with the start of two large affordable housing 
projects in the West Bank undertaken by PIF and Bayti Real 
Estate Investment Co.  (Note: PIF estimates the housing 
shortfall in the West Bank is 200,000 units and will increase 
by ten percent annually.  To address the need, PIF will 
construct 2,000 affordable units in Ramallah.  In partnership 
with Qatari Diar Real Estate Investment Co., Bayti has 
designed a fully self-contained town called "Rawabi," located 
nine km north of Ramallah, and plans to break ground in 2009. 
 Rawabi will offer 5,000 housing units.  The Rawabi deal was 
the centerpiece of the Bethlehem Investment Conference in 
May.  End Note.) 
 
 4. (SBU) VP Drumheller reports that much work remains to be 
done before the first loans can be issued, but is comfortable 
with the pace of progress with OPIC's partners.  OPIC is 
currently focused on two issues.  First, IFC and OPIC require 
a minimum USD 20m of first loss coverage, and need DFID to 
commit in writing to provide the full amount.  (Note: OPIC 
states it does not need the cash in hand until the end of 
2009, but needs a written commitment before the end of 2008. 
End note.) 
 
 5. (C) OPIC also needs to secure a Palestinian Presidential 
Decree invalidating an Ottoman-era law which stipulates that 
the total amount of interest on a loan cannot exceed the 
original amount of the loan, thereby making a 25-year loan 
impossible.  The law also caps the amount of interest at nine 
percent, which could prohibit banks from penalizing 
delinquent borrowers.  (Note: The nine percent clause is 
reportedly routinely ignored by local banks; however, it 
could provide the basis of a lawsuit if left on the books. 
End note.)  PMA Governor Jihad al-Wazir told Econoff on 
October 21 that the PMA supports repealing the law and will 
consult with PIF on the precise language of the needed draft 
decree. 
 
 6. (U) OPIC has cleared this message. 
WALLES