Barry,C., Castaneda G. and J.B. Lipscomb (1995) “The Structure of Mortgage Markets in Mexico and Prospects for Their Securitization” Journal of Housing Research Vol. 5, n.2, pp. 173– 204.
Caloca Gonzalez, M. (2006) “Mortgage Backed Securitization: New Legal Developments in Mexico.” http://www.natlaw.com/pubs/spmxbk8.htm
CGFS Working Group Report (2006) “Housing Finance in the Global Financial Market” Bank for International Settlements, CGFS Papers 26.
Current Housing Situation in Mexico (2005) and (2006) by CIDOC and SHF with support from CONAVI and Harvard University Joint Center for Housing.
Haber, S. (2005) “Banking with and Without Deposit Insurance: Mexico’s Banking Experiments, 1884–2004” Stanford University, Mimeo.
Lea, M.J. and S.A. Bernstein (1996) “Housing Finance in an Inflationary Economy: The Experience with Mexico” Journal of Housing Economics 5, pp. 87– 104.
Pikering, N. (2000) “The Sofoles: Niche Lending or New Leaders in the Mexican Mortgage Market?” W00-2 Joint Center for Housing Studies, Harvard University.
Rogers, J. and R. Zepeda (2006) “Mexico Looks to Denmark on Mortgage-Backed Securities” Global Banking and Financing Policy Review, Vol., pp. 123– 6.
SHF (2006) “White Paper” http://www.shf.gob.mx/files/pdf/06%20Portfolio%20Information.pdf
Skelton, E.C. (2006) “Laying the Foundation for a Mortgage Industry in Mexico” Federal Reserve Bank of Dallas Economic Letters; Vol. 1, n.10; October.
Zarley, T.L. (1995) “Creating an Enabling Environment for Housing: Recent Reforms in Mexico” Housing Policy Debate Vol. 4, n.2, pp. 239– 249
Prepared by Luisa Zanforlin and Marco Espinosa. The authors thank David Robinson and Steve Phillips for useful comments and suggestions, and Claudia Pescetto for her able research assistance. Special thanks to Alan Elizondo and Oscar Grajales Herce in SHF for very informative and candid communications, and to staff of the Bank of Mexico and Hacienda for helpful comments and suggestions.
Veces Salario Minimo or times minimum wage: effectively an index for wage levels which is adjusted once a year following contractual negotiations. For example, workers would be earning 1, 2 5 times the VSM and thus each increase in the VSM would translate in an equivalent wage increase. This wage structure applies predominantly to lower income wage earners.
The UDI (Unidad de Inversion) is a unit of account, the value of which is updated daily and reflects the changes in the consumer price index. On the 10 and the 26 of each month the Bank of Mexico publishes the UDI’s value for the next fifteen days. On the 10 and the 26th day of the month the change in UDI value will be equal to the change in the consumer price index in the previous 15 days of the month, the value for the days between the 10 and 26th will be computed by distributing the total increase in the CPI across the number of days in the period. The UDI had a value of 1 on April 4, 1995 (as of April 2007 approximately 3.85).
Ley de Transparencia y de Fomento a la Competencia del Credito Garantizado.
See Section B of Appendix C in Ley de Transparencia y de Fomento a la Competencia del Credito Garantizado.
Only in the cases whereby the foreclosure process is not contested, in all other cases the foreclosure has to be ordered by a court.
Only in the cases whereby the foreclosure process is not controversial, in all other cases the foreclosure has to be ordered by a court.
Under Mexican law, the transfer of real estate titles must be registered with a central registry office—a lengthy and costly process—and the law pertaining to real estate foreclosures established other creditors as senior to mortgage lenders during foreclosure procedures. The use of trusts allows mortgages loan rights to be transferred without registration and the application of trusts foreclosure procedures rather than real-estate procedures.
Historically, foreclosures in Mexico could take up to 5 years and home owners were protected against negative equity. Under Mexican law, the transfer of real estate titles must be registered with a central registry office, a lengthy and costly process. And, the law establishes other creditors as senior to mortgage lenders during foreclosure procedures, dis-incentivating investor participation in securitization issuances.
The SHF took over most of the responsibilities of the FOVI, which since 1963 had directed government resources, and World Bank loans, to fund housing mortgage and construction loans for low to moderate income households.
Direct SHF financing of Sofoles is to be discontinued in 2009 and, by 2013, SHF is to be a self-sufficient agency. The latest data available show that, as of the end of 2005, the agency held close to US$ 15 billion in direct home loans, from US$ 13 billion in 2002.
This is called a “first loss” position.
In particular, to qualify for GPI mortgages have to meet certain debt specific income ratios, loan to value ratios, property type and values, and reporting requirements for the financial intermediaries.
Data according to Fitch. There were two operations in 2004 and 2005 identical in nature for US$ 4.5 billion and US$ 2.4 billion by Banamex and Banorte respectively. However, the two operations, which concerned the securitization of a loan by IPAB (the deposit insurance agency), were only possible because of a legal loophole in the terms of the original loans which is not present in other loans by IPAB. Therefore, similar operations cannot be repeated and are considered of one-off nature, therefore excluded from the total for comparison purposes.
All data by Fitch.
Data by Fitch.
Bonos Respaldados por Hipotecas.
Every fungible Borhi structure has reopening periods ranging from one to three years.
Infonavit is a housing fund, funded with private sector worker contributions. It provides housing credit for low-income workers. Infonavit is currently the largest housing fund with total credit of about 30 percent of GDP. In the case of an increase in inflation (UDI) not matched by increases in VSM, INFONAVIT remains responsible for the servicing of the RMBSs in UDIs.
Payments due to Infonavit for mortgage credit are automatically deducted from payroll wages and thus offer a certain degree of payment assurance. However, when the workers are unemployed, Infonavit typically allows for extensive grace periods on its loans.
This is reflected, for example, in the following quote from From S&P’s Presale report for CEDEVIS5U-2, of September 2005: “Infonavit’s rating …reflect the institution’s strong importance in the implementation of the housing policy followed by the Mexican government and incorporate a degree of implicit government support.”
Mortgage insurance allows the borrower to increase the maximum allowed loan-to-value ratio. While, in general, loan-to-value ratios have been around 65 percent at mortgage origination, if the borrower qualifies to receive mortgage insurance (GPI) then the loan-to-value ratio is increased to 80 percent for UDI-denominated mortgages and to 90 percent for peso-denominated loans.
In more recent deals, the initial collateralization has been close to 1.0 percent, with the over-collateralization expected to build to a higher target value as the bond principal amortizes.
Senior tranches have represented about 80 percent of the portfolios, while junior or “mezzanine” tranches have ranged from 3 to 12 percent.
For example, repayments rates are typically assumed to be constant, imputed either to the loan pool or to each single loan. While in Mexico typically there are no restrictions or penalties on prepayments, the cost of re-financing mortgages is high, thus prepayment rates have tended to be less sensitive to interest rates than in the U.S. Market reports suggest the constant pre-payment rate has been assumed at 5 percent, and indeed according to an SHF White Paper, historical experience with prepayments has been around this level.
Price vendors are a figure created in Mexico because of the structural illiquidity of the private issues market. Such institutions are supposed to be independent and to provide price information for market operators.
Junior tranches are also referred to as “mezzanines.”
Local scale A is equivalent to BB- on the international scale.
Technical Note on Housing Finance, prepared for the 2006 FSAP Update (http://wbln0018.worldbank.org/FPS/fsapcountrydb.nsf/FSAPexternalcountryreports?OpenPage&count=5000).