LOS ANGELES -- Mexico will have to move quickly in developing a strong housing finance system if it is to meet President Fox’s ambitious goal of doubling the country’s housing production by 2006, according to a report recently published in Mortgage Banking magazine.
“Mexico is making progress in creating the infrastructure to make affordable mortgage credit available to its growing middle class,” said report co-author David Dale-Johnson, Ph.D. of the University of Southern California Lusk Center for Real Estate (www.usc.edu/lusk). “But if it does not continue to move forward quickly, it will not achieve President Fox’s goal of increasing production over the next three years to 750,000 new homes annually. Tough challenges lie ahead,” added Dale-Johnson, a professor at the USC Marshall School of Business. He wrote the report together with Gene Towle, Managing Partner, Softec, S. C. Mexico and Professor of Real Estate Marketing, Universidad del Valle de México in Mexico City.
Mexico has established a federal development bank, known as Sociedad Hipotecaria Federal (SHF), that facilitates mortgage financing for low-to-moderate income buyers much like Fannie Mae in the U.S. “SHF is a key player in the future of the primary and secondary mortgage markets in Mexico,” Dale-Johnson commented. One of its new roles is to facilitate the securitization of mortgages originated through pension savings programs for public and private sector employees.
Now, to meet President Fox’s housing production goal, Mexico is in the process of expanding the breadth and depth of its housing finance programs. For example, it plans to increase the availability of mortgage financing to buyers with incomes between U.S.$17,000 - $40,000, who typically buy homes priced from U.S.$38,000 to $100,000. Until now, few mortgages have been available to these buyers even though they constitute one of the fastest-growing housing sectors. “Lenders expect to develop products for this market as the Mexican middle class continues to grow,” Dale-Johnson commented. In another initiative, SHF will take the lead in introducing and issuing mortgage-backed securities (MBS) backed by guarantees to investors.
Under Fox’s plan, SHF as well as mortgage banks and commercial banks will be responsible for most of Mexico’s new loan production. “The ability of SHF and the banks to tap the secondary market for capital is critical,” Dale-Johnson noted. He added that the mortgage banks need to broaden their product lines and underwriting, originating and loan servicing capabilities. Furthermore, “there needs to be a cooperative effort between local governments and the development community to facilitate competitive land development,” Dale-Johnson said. “Without entitled land and infrastructure, no houses will be built.”