Latin Finance - April 2008 - 15

mexican mortgages SHF Stays the Course by Greg Brosnan fter almost a decade spent successfully anchoring the birth of LatAm’s most vibrant RMBS market, Mexican state mortgage lender Sociedad Hipotecaria Federal (SHF) was on track to abdicate its role as a housing credit provider. The plan was to stop lending altogether by 2009 and hand the financing reigns to the private sector as it concentrated on being a market-maker and provider of partial guarantees. But as the subprime crisis deepens and a US recession bears down on an immature but increasingly vibrant local housing and RMBS market, SHF is siding with a chorus of voices urging it not to pull out. Javier Gavito, who took over as SHF director in October, intends to bump back up the institution’s loan portfolio, from 40 billion pesos in March. He also wants to focus on the next rung down on Mexico’s housing ladder: unsalaried workers ranging from taxi-drivers to waiters and rural teachers who were largely left behind in the recent boom. The plan, Gavito tells LatinFinance in an interview, is to use Mexican credit unions as a bridge to bring unsalaried workers into the housing market. The credit unions have traditionally provided small, short-maturity loans to the sector. Affordable long-term financing from SHF will put mortgages within their members’ grasp. Credit unions can use unsalaried members’ saving, borrowing and payback histories to gauge whether they will cover mortgage payments. “The goal of the SHF, like that of any other development bank, is to lead the private sector to places where the markets are absent,” says Gavito. “The housing deficit in this country is focused on low-salaried, and in particular, unsalaried workers. SHF has to go in and cover that demand,” he adds. SHF was created in 2001 to spread a culture of home-owning among the A Mexican mortgage agency SHF is sticking around to shepherd the market through troubled times. This brings temporary relief, but the private sector wants to lead. Continuing to make markets: SHF’s trading floor in Mexico middle and working classes in a country still recovering from devastating financial crisis. Acting as the main lender to nascent mortgage lending institutions known as sofoles, SHF helped ignite a housing boom by promoting securitization of mortgages through local RMBS, or borhis. Its intention was to kickstart the market for the private sector. Outstanding loans to banks and sofoles fell to 40.3 billion pesos last year from 45.0 billion pesos in 2006 as the agency shifted its focus to partial mortgage guarantees. SHF is preparing to stand on its own as a mortgage insurer by 2012, when the government is scheduled to withdraw the agency’s state guarantee. The measure will ensure a more level playing field of competition between SHF and private guarantors, like Genworth, which are increasingly setting up shop in Mexico. Virgin Territory Gavito, 54, already has ample experience in the sector he is targeting, as former head of Bansefi, a development bank that provides financial services to the poor. To plug a gaping housing deficit among unsalaried workers, especially in rural and semi-urban areas, SHF has begun working with two credit unions – Caja Inmaculada and Caja Popular Mexicana – and hopes to sign contracts with about 10 more in 2008. “If that’s where the potential market is, we have to take financial intermediaries to these markets,” he says. “We have traditionally dealt with sofoles. Now we’ll do business with any financial April 2008 LATINFINANCE 15
Latin Finance - April 2008

Table of Contents for the Digital Edition of Latin Finance - April 2008
