Euromoney Liquid real estate March 2007
In Latin America during 2006, total mortgage-backed securitizations amounted to $2.9 billion (21% of domestic securitization volumes for the region) against $1.7 billion in 2005.
Structured finance, including MBS and securitizations of loans for residential or commercial property development, took off in Mexico in 2003. Real estate-related deals represented 47% of the total of $4.4 billion of securitizations in Mexico’s local market in 2006, according to Moody’s.
In Brazil, 8.2% of the total of $5.5 billion of securitizations were mortgage backed. The number of issuers of Certificados de Recebiveis Imobiliarios Certificates of Real Estate Receivables) rose to 18 in 2006 from eight in 2005.
In Colombia, mortgage-backed deals represented 96% of the total of $674 million of securitizations in 2006. The market was once again dictated by activity from Titularizadora Colombiana, the Colombian equivalent of Fannie Mae. Total securitization rose by 109% between 2005 and 2006. Overall, Colombia has the most advanced MBS market in Latin America in terms of outstanding mortgages that have been securitized (30%).
Alexander Batchvarov, head of international structured finance research at Merrill Lynch, says: “We expect to see real estate-backed securitizations in Latin America grow strongly in the next few years.
“In Brazil, we expect banks to start securitizing mortgages for the first time within the next few months. In Mexico, it is expected that mortgages will rise from 2% of GDP today to 11% within seven or eight years, which would lead to a big acceleration in mortgage-backed securitizations.”
He believes it will be several years before MBS takes off in Argentina because mortgage lending itself is still very limited in the country. Before the country’s economic crisis of 2001, outstanding mortgages amounted to 7% of GDP while today they are just 1.4%.
However real estate developers, including IRSA, are also expected to issue bonds this year. It is also understood that local and international real estate investors are putting together a fund for $150-$200 million to invest in real estate.
Useful
Mexico’s advanced state of development has much to do with Sofoles (Sociedad Financiera de Objeto Limitado), limited finance companies that hold deposits and provide loans to the public or to property developers, usually backed by securitizations.
Carlos Benavides, assistant vice president at Moody’s, says: “Sofoles have been very useful in the Mexican market to provide credit to property developers, mostly for lower income people.” Carlos Maymí, senior credit officer at Moody’s, adds: “This type of bridge loan securitization could be a useful mechanism to help real estate development in other Latin American countries.”
Issuers of real estate-backed securitizations in Latin America are increasingly using local rather than international markets. Maymí says: “We see that the investor base in many Latin American countries is big enough for a local issue.”
