National Housing Bank has decided to come up with a mortgage guarantee company by June 2011. The role of this firm would be to compensate banks as well as housing finance companies (HFCs) in cases the home loan borrower defaults.

In order to provide technical aid in the move, NHB has tied up with a US bases mortgage guarantee firm. The compamy would be formed by four partners: NHB, the US mortgage guarantee firm, Asian Development Bank (ADB) and International Finance Company (IFC). The latter two will have 10% stake each in the new company.

"They (the US-based company) are an experienced international player in mortgage guarantee business and also our strategic partner," said NHB Chairman R V Verma.

The year 2009-10 saw a sharp rise of 27.22% in the non performing assets (NPAs) of the housing finance segment. Also, the last 18 months have witnessed maximum credit surge coming from the home loan segment.

The mortgage company will thus help banks to confidently lend to borrowers in the high risk category.