Bank Jerusalem and Migdal to establish a 400 million shekel credit line for jumbo loans against apartments

Bank Jerusalem and the insurance and finance company Migdal have signed a joint financing agreement (syndication deal), under which a credit line of approximately 400 million shekels will be established. The line is intended for providing "jumbo loans" – private loans in large amounts, granted against the mortgage of a residential apartment as collateral for debt repayment.

The cooperation will operate on a revolving mechanism for three and a half years, so that funds from repayments of loans that are settled will be used to provide new loans throughout the period.

The division of roles between the entities is intended to combine the advantages of each party:

• Bank Jerusalem will serve as the operating body: it will locate the borrowers, perform risk assessments and underwriting, provide the credit, and manage the collection and service throughout the life of the loan.

• Migdal, for its part, will participate in providing the financing from the savings funds it manages.

This structure meets the interests of both entities under the regulatory restrictions applicable to them. For Bank Jerusalem, sharing the financing burden with an institutional entity allows for increasing activity and income from management fees without violating its capital adequacy requirements. For Migdal, the move allows for a foothold in the retail credit sector backed by high-quality real estate collateral, for the benefit of the members' returns, without the need to establish an independent customer service and operations system.

The current agreement constitutes another layer in the ongoing strategic partnership between the two entities, which has yielded a series of deals in recent years totaling nearly one billion shekels. As part of their cooperation, Migdal previously purchased existing mortgage portfolios from Bank Jerusalem in separate deals of approximately 350 million shekels and approximately 330 million shekels. However, unlike those deals, in which the bank sold existing portfolios after the fact to free up equity required to meet Bank of Israel restrictions, the current deal is the first of its kind between the parties in which a revolving syndication line is established in advance for providing joint jumbo loans.

The deal was initiated and led on behalf of the bank by Oded Kravitz, Director of the Financial Innovation Department, accompanied by Adv. Yossi Alhayek. On behalf of Migdal, the move was led by Shiran Blau, Director of the Mortgage Department.