Mortgage Loans Financing Mexico
The development of the mortgage industry in Mexico began in the early 1990s.Generally before that period mortgage lenders were the mortgage banks. Due to the Skewed income distribution the government has played a major role in the mortgage industry.
Since the establishment of the first public housing finance institution BANOBRAS in 1993 the government introduced housing pension funds (the INFONAVIT and FOVISSSTE for the private and public sector workers), a central bank rediscounting facility (the FOVI), and an un budget subsidy program (FONHAPO) for the low-income informal market.
The government imposed a mandatory lending ratio on commercial private banks in 1960s. Such type of controls in a high inflationary environment led to the demise of mortgage bond market by late 1970s.
Inflationary Situation and Housing Finance in Mexico
Housing finance in the developing countries is some how problematic because there are macro economic fluctuations and lack of legal, technological and regulatory frameworks.
In the year 1984 the central bank of Mexico made a use of the dual-index mortgage (DIM) system as a means to improve the borrower affordability without sacrificing lender profitability.
The introduction of the DIM has been cited as a major success story in developing country housing finance as it facilitates the extension of affordable finance for housing without expensive interest rate subsidies.
Mexican Housing Experience
- Compulsory use of the fixed-rate mortgages in the inflationary situation is a recipe for disaster.
- In case of long term loans in an inflationary situation, DIM has a greater significance.
- Certain problems arise with regards to the DIM in the private sector settings.
- In case of Mexico the setting of DIM is very sensitive.
- The effectiveness of DIM depends upon existence of reliable wage or income measures.
Mortgage Lenders in Mexico
- Coldwell Banker Bienes Raíces
- Financiamiento Azteca
- Financiera Independencia
- Fondo de Operación y Financiamiento Bancario a la Vivienda
- Ford Credit
- GE Capital Real Estate
- Hipotecaria General
- Hipotecaria Nacional
- Hipotecaria Su Casita
- Hir Casa
- Instituto Nacional para la Vivienda
- Promotora Mobiliaria
- SuCasita.com.mx
- Terras Hipotecaria
However it is clear from the experience that both policy makers and financial executives need an understanding of the characteristics of the mortgages provided to the consumers and how they interact with the funding sources of the institution in different macro economic environments.
Mortgage Backed Securitization in Mexico
The housing goal to build 750,000 houses a year by 2006 and mortgage-backed securitization is a good financial tool for its accomplishment. It is just in its infancy stage. There is the presence of the securitization of assets like oil sales receivables; toll roads receivables, credit card receivables, and mining export receivables.
The securitization had faced the following problems in the initial periods that are as follows.
Trusts could not issue debts.There was not a system of security interests as developed in United States.There was an old bankruptcy law that was not designed to deal complex multinational corporations and sophisticated commercial financing.
For the above impediments in the Mexican mortgage market, Mexican securitization transactions typically set up through the United States, using American banks, currency denominated in dollars, the American securities market.
Still today there is no special laws with regards to the securitization transactions as in the case of Argentina and others.
The laws amended for securitization in Mexico are as follows.
- The Law of Banking Institutions.
- The Civil Code for the Federal District of Mexico.
- The Commerce Code.
- The General Law of Negotiable Instruments and Credit Transactions.
- The stock market law.
The recent laws to facilitate securitization in Mexico are as follows The Organic Law of the Federal Mortgage Agency and its regulatory rules. The Transparency and promotion law for competition in the secured credit.
Since the year 1994 a large number of changes are being made to develop a mortgage backed security market in Mexico. The government has stepped forward to reduce the deficit in the housing sector.
