The MüchenerHyp mortgage product “Münchener Hochausläufer” enables borrowers to put down less than the usual 20% deposit (plus additional costs) - in some cases as little as 5% is needed.

Homeownership is still seen as one of the most important pillars of private pension planning, which in times of fading public pension plans is becoming more and more important. And yet, the average age of the German first time buyer is currently in the late thirties, a figure that stands well above the average of most European countries. A large proportion of the population continues to be excluded from getting on the property ladder, because of the high costs associated with buying a first home though being able to meet their monthly payment obligations due to good incomes.

„The target audience of MünchenerHyp’s new mortgage product includes people, who – for example due to long studies - have not been able to save the often required 20% deposit plus additional costs.“ states Matthias Dous, Managing Director Central Europe at Genworth’s mortgage insurance business.

By offering this new product, MünchenerHyp continues to bring product innovation to the German mortgage lending landscape. By working with Genworth Financial, MünchenerHyp is able to provide an alternative to the already existing mortgage products, that is already well established in other countries and thus present new ways to homeownership.

“By offering the new product “Münchener Hochausläufer” to our customers, we are now able to reach borrowers with low deposits but good incomes and provide them with mortgages at attractive rates. At the same time we can help to support the German housing market“, says Erich Rödel, CEO of Münchener Hypothekenbank. The mortgage loan remains with MünchenerHyp, which is another benefit to the borrower.

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New mortgage commitments totalled 1,670 million euros or 239 million euros (+17 percent) over the same year-ago figure.

“These good results underline the performance capabilities of our customer-oriented sales strategy,“ said Erich Rödel, speaker of the Münchener Hypothekenbank’s board of management. Growth in the commercial property lending business was particularly dynamic where MünchenerHyp increased the volume of its new business over the comparable period in 2005 by 206 million euros (+40 percent) to 718 million euros. 

Total assets rose to 35.4 billion euros during the first nine months of the year. Results from operations before provisions for risk improved to 35.0 million euros from 34.6 million euros in the comparable period in 2005.

In view of the strong growth of the German economy MünchenerHyp anticipates that it will be able to continue its business momentum in the coming months. It is expected that the market for private housing, in particular, will experience a bring-forward effect due to the scheduled increase in the value added tax. “I am confident that we will surpass the previous year’s results,“ noted Erich Rödel.

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The outlook on all ratings has been changed to stable from negative.

The downgrade of Muenchener Hyp's FSR is based on Moody's view that the bank's financial fundamentals are stable and sound but are nevertheless better reflected by an FSR level of C+ relative to similarly rated banks. More specifically, the bank's fundamentals reflect its low risk profile, with good asset quality and efficiency but relatively low, albeit stable, risk-weighted profitability. The bank's economic capital base is satisfactory.

Moody's noted that Muenchener Hyp's C+ FSR is strongly supported by the bank's well-defined and stable business strategy as a residential mortgage lender and real estate financier in Germany. The business model is based on the bank's integrated position as a service provider within the German cooperative banking sector ("Finanzverbund"), which provides it with consistent access to the sector's large retail client base.

The FSR additionally takes into account the bank's improved risk awareness and risk management. Muenchener Hyp also intends to further strengthen its client relationships in the commercial real estate market -- which Moody's believes should help to diversify its revenue sources and enhance profitability.

The change in outlook to stable reflects Moody's expectation that Muenchener Hyp will maintain its low risk business profile and will make further progress in its efforts to strengthen efficiency and operating profitability.

Although Moody's downgraded the bank's FSR to reflect its limited business profile, the rating agency does not believe that this rating action signals an increased default risk -- hence the affirmation of the bank's debt and deposit ratings. Moody's noted that, given Muenchener Hyp's key role as a residential mortgage lender in Germany and a well-established issuer in the Pfandbrief market, it would likely benefit from external systemic support in the event that it required such support to avoid a default.

The following ratings were affirmed:

• Aa3 long-term debt and deposits
• Prime-1 short-term debt and deposits

The following rating was downgraded:

• Bank financial strength rating to C+ from B-.

The previous rating action was the change in outlook to negative in July 2004.

Muenchener Hypothekenbank eG is headquartered in Munich, Germany and had total assets of EUR34 billion as of end-December 2005.

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The Bank’s total capital ratio currently stands at 10.6 percent. Münchener Hypothekenbank views these figures as confirmation that it is on the right path and well prepared for the future: “Our MHB 2008 strategy is generating benefits as planned and the results underline the positive development of our earnings and our risk situation,” said Erich Rödel, spokesman of the Münchener Hypothekenbank’s Board of Management.

In comparison to the same year-ago period new business increased by € 142m to € 1,129m, and even by 20 percent in the residential housing finance area. “We are certain that these results reflect an increased number of building applications submitted for approval in 2005 as the federal home ownership subsidy ended in 2006; these applications were approved in 2006. The main reason behind the increase in private housing finance results is, however, our improved spectrum of services featuring our modularly structured range of products and a clearer focus on sales activities,” noted Erich Rödel. “With our flexible platform strategy, we can provide customers tailor-made products in cooperation with the Volksbanken and Raiffeisenbanken. This reflects how we have aligned our activities with the very professional consulting approach at the Volksbanken and Raiffeisenbanken. Moreover, we can combine this diverse range of products with low-cost processing and handling procedures. Our motto here is úIndividual in sales, standardised in handling.’”

The Bank’s commercial property lending business expanded in line with strategic plans. Commitments made in this area of business climbed to about € 480m during the first six months. This increase was mainly driven by strong growth noted in the Bank’s international business activities. The Bank successfully concluded structured financing deals, especially in the USA, without departing from their conservative approach to risk. Münchener Hypothekenbank achieved its ambitious goals in the domestic commercial direct finance business area although “there is still a lot of liquidity flowing into Germany that is generating higher property prices and thus higher Loan-to-Value-Ratios. Our goal is to control the expansion of our direct commercial property lending activities in Germany by only entering into carefully selected transactions,” stated Erich Rödel.

Based on the figures reported for the first half of the year the outlook for the remainder of 2006 is favourable: “Münchener Hypothekenbank’s good performance in the first half of 2006 confirms our business strategy. We are confident that for the remainder of the year we will not only be able to continue last year’s good results, we will be able to continue the upward trend in our performance. Factors driving our success are competitive products, a good sales concept, fast and secure processes, as well as a high level of customer satisfaction. They form the fundament for forward looking market activities,” says Erich Rödel.

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MURECON brings its comprehensive consulting and network competencies to the venture, while MünchenerHyp adds its proven strengths in the field of structured finance. Both partners will benefit from the greater sustained demand for comprehensive advisory services in the property investment sector, and at the same time they will also be able to sharpen their service profile.

On one hand, the number of investors searching for investment opportunities with calculable risks is growing, and on the other, prices for commercial real estate in Germany are quite favourable in comparison to prices in neighbouring countries. In addition, within the framework of portfolio optimisation processes, real estate investments are being managed more professionally than in the past. As a result, the volume of real estate transactions has risen and has led to an increasing demand for advisory services.

MURECON’s spectrum of services includes:

• Arranging contacts between buyers and sellers in Germany and abroad,
• accompanying investors during bidding procedures or private transactions,
• advising investors in the preparation of investment strategies,
• assembling professional teams – consisting of legal counsel, tax advisors, finaciers and appraisers – for property transactions,
• acquiring equity capital partners for property investments,
• arranging/optimising third-party capital for planned real estate purchases,
• advising investors during the preparation and evaluation of business plans, and the presentation of the project and its investors to providers of capital,
• reviewing property portfolios to identify lumps of accumulated risk or value destroyers.

Independent advice is the key factor for investors. Their advisors must work independently of service providers such as banks, and provide a range of services on an exclusive basis.

Leonhard Goebel is the Managing Director and Managing Partner of MURECON. He is ideally suited for this position as he has over twenty years of experience in the field of real estate investments, as well as a wide network of national and international contacts to key persons and companies directly or indirectly involved with real estate. Furthermore, he also has extensive insider knowledge of the relevant real estate markets.

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The transaction shall be benchmark sized and will have a benchmark maturity. It is intended to launch and price in early September.MünchenerHyp will use the remaining time to present their business model to international investors as part of their preparations for this issue. Numerous roadshows are planned for the coming weeks with presentations planned with eastern European central banks and investors in the Far East. Within Asia the Bank will visit financial centres in Tokyo, Seoul, Taipeh, Hong Kong and Singapore in addition to holding one-on-one discussions with individual investors.

The site's navigational functions are now clearly arranged along the lines of the Münchener Hypothekenbank's business areas.

In addition, the site's English language content was expanded to accommodate the needs of the Bank's international financing clientele and Pfandbrief investors. MünchenerHyp's success is driven by short decision paths, direct contacts and competent service. This is why visitors to the Bank's new Web site can avoid delay and quickly find the name of the key contact person for each business area. The Bank's new corporate design was also incorporated in its revised Web site design.

Mortgage commitments made in the Bank’s core business area of residential finance rose by 36.7 percent to € 1,253 million. Low interest rates fuelled strong demand for long-term financing. MünchenerHyp is particularly competitive in this segment of the lending market. The expiration of state subsidies for home buyers also boosted demand for home loans in 2005. The flat rate structure encouraged the increase in loan referrals from Volksbanken and Raiffeisenbanken.MünchenerHyp’s flexibly structured financing products for the private customer segment reinforced the good business relationship between it and its partner banks as the Bank’s products fulfilled local sales requirements. MünchenerHyp’s twelve regional offices play an important role in maintaining this business relationship as they provide the Volksbanken and Raiffeisenbanken top quality financial advice and also ensure rapid responses to all enquiries.Short decision paths and a flexible approach to processes and procedures also helped to boost new business performance in the commercial property finance sector – especially in the Bank’s direct business activities outside of Germany.

Total new business in this area almost doubled and rose by € 429.8 million to € 966.9 million.Seasoned property finance professionals who have extensive local knowledge and contacts represent MünchenerHyp in key commercial property markets outside of Germany. Moreover, the Bank also benefits abroad because it focuses its efforts on market segments where it can leverage its strengths as an independent specialist.Lending commitments made to public-sector borrowers declined as less-than-satisfactory margins once again made the MünchenerHy reluctant to lend. New business results in this sector amounted to €1.9 billion, which was lower than in the same year-ago period.By the end of February 2006 MünchenerHyp had made total new mortgage commitments valued at € 352.9 million, in comparison to € 288.1 million posted in the same year-ago period.

The Bank further strengthened its presence in one of Europe’s most important property markets by opening a representative office in the London City at the start of 2006.The underlying reasons behind this step were to achieve an even more efficient penetration of this key market and to ensure a sustainable flow of loans as outlined in the Bank’s acquisition strategy. This also applies to financing cross-border property transactions in continental Europe including Germany for investors, most of whom are domiciled in the UK.The Bank’s representative office in London will hold a grand opening celebration in May for its clients and business associates.