Mortgage Market in Mexico

1 de dic de 2023
Contents

I. Introduction

II. Demographic Dynamics, Housing Demand and Financing Needs

III. The Mexican Mortgage Market including FOVI/ SHF role

IV. Securitization Model for Mexico and Current Strategy

V. Pension Funds & BORHIS

VI. Low-Income Mortgage Alternatives

VII. Challenges ahead in Housing Finance

2
SHF: Mandate & activities, Mission & Vision
SHF was created in 2001 as a government financial
institution oriented to foster the development of the primary
Mission:
and secondary mortgage markets.
Lead the development of a
As a Mortgage bank: SHF grants long term financing to competitive market in
order to allow all Mexicans
financial intermediaries and covers their interest rate risk.
be able to acquire a
SHF does not lend directly to individuals. residence.
As a Guarantor: SHF offers products like mortgage
insurance and financial guaranties. Vision:
To be an innovative
Until 2013, SHF will have the 100% guarantee from the institution in solutions to
Federal Government. After 2009 SHF will not be able to develop social housing.
grant finance, hence, it is necessary to develop alternative
mechanisms of housing financing.

SHF considers the securitization of mortgages as the most

efficient mechanism of housing financing.
3
Contents
I. Introduction

II. Demographic Dynamics, Housing Demand and Financing Needs

III. The Mexican Mortgage Market including FOVI/ SHF role

IV. Securitization Model for Mexico and Current Strategy

V. Pension Funds & BORHIS

VI. Low-Income Mortgage Alternatives

VII. Challenges ahead in Housing Finance

4
 Over the next 25 years, the number of households will grow at an
annual rate of 2% and the year of 2012 will have the larger number of
household formation.

From 2000 to 2030 the number of According to official estimates, 672,018

households in Mexico will grow 83%. new households were formed during 2005
These favorable population dynamics is throughout the country. This figure will
coupled with an annual per capita rise up until 2012, when 691,242 new
income of approximately USD $9,500* households will be formed.

Number of Households in Mexico Population by Age Groups in 2004

Million Households

45 41.8 700 691

36.3
38
690

Million of Households
36

Thousands of New
40 680
667 34

Households
35 670 32
660
30 650
30

25 22.8 640
636 28
630 26
20 620
25.5
24
15 9.8 610 22
600 20
10 4.8
5
0 New Households Total Number of Households
1940 1970 2000 2030 e/

Source: CONAPO Source: CONAPO

/* PPP Methodology

5
 Housing Demand

 In Mexico, there are 26.7 million families of which:

17.2 million already have an adequate house.
9.4 million families do not have an adequate house and haven’t been attended yet.
Annually, around 500,000 new families are generated, of which approximately 60%
are in conditions of demanding a mortgage loan.
In addition to the families that do not have an adequate house, there are 4
components that together generate the annual housing demand.

Estimation of the Housing Demand in 2008

Component Number of Houses %
New Families 299,977 25.8%
Families without a House 765,113 65.9%
Families demanding a Better House 71,565 6.3%
Families who are Granted a Loan after a Former Rejection 22,724 2.0%
Total 1,159,379 100.0%

Source: INEGI.

6
 Housing Demand: Strengthening of the Middle Class
DISTRIBUTION OF FAMILIES ACCORDING TO THEIR
INCOME (%)
34.4 and more
A gradual increase of the middle class is
30.1-34.4
expected. This will allow a strengthening of In 2006,
the housing demand from financially 25.8-30.1 80.2% of

Dollars Earned per Day

the families
healthy families. 21.5-25.8
received
more than
12.9 dollars
 Between the year 2000 and 2006, 17.2-21.5 a day
the percentage of families that
12.9-17.2
received more than 12.9 dollars a
day increased from 72.8% to 80.2%. 8.6-12.9

 The low income sectors are the ones 6.5-8.6

that have experienced greater 4.3-6.5

2006
2000
increases in their income per family
0-4.3
between the years 2000 and 2006.
0 10 20 30 40
STRENGTHENING OF THE PURCHASING POWER OF THE LOW AND MIDDLE CLASSES
Quarterly Income per Family (Dollars)
I II III IV V VI VII VIII IX X
2000 $462 $793 $1,080 $1,376 $1,708 $2,135 $2,677 $3,407 $4,934 $12,526
2006 $791 $1,177 $1,382 $1,742 $2,050 $2,388 $3,085 $3,805 $5,084 $11,330
Total Change $329 $384 $301 $366 $342 $253 $408 $398 $150 -$1,196
% Change 71.1% 48.5% 27.9% 26.6% 20.1% 11.8% 15.3% 11.7% 3.0% -9.6%
Source: INEGI.

7
 Demographic dynamics: a challenge and opportunity in the
mortgage market
MORTGAGE PORTFOLIO IN MEXICO
400,000
Even under very conservative assumptions,

Million Dollars
350,000
%
SHF estimates that the residential mortgage 300,000 wt h Rate
: 10.1
nnua l Gro
portfolio will grow from USD $80,724 millions 250,000
Cum ulative A

in 2007 to USD $338,300 millions 2020. 200,000

150,000
100,000
50,000

-
20062007 20082009201020112012 201320142015 2016201720182019 2020

INFONAVIT and FOVISSSTE SOFOLS and Banks

The projections of the mortgage portfolio are based on potential estimated demand assuming an 3%
annual growth rate for GDP and the same levels for mortgage rates than those of 2006.

The flow of financial savings available in the ACCUMULATED NET FLOW NEEDED TO FINANCE
country will not be sufficient to finance the 2500 MORTGAGE LOANS

growth of mortgage portfolios. The sale of 2000 2006 Billion Pesos

mortgage portfolios to domestic institutional 1500

investors as well as foreign investors is an 1000

absolute must to maintain the growth of the 500

mortgage sector. 0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Private Mortgages Siefores Savings Savings from banks

To attend the growing demand of mortgage loans in the following years, it was necessary to develop a
Residential Mortgage Backed Securities market.
8
Contents
I. Introduction

II. Demographic Dynamics, Housing Demand and Financing Needs

III. The Mexican Mortgage Market including FOVI/ SHF role

IV. Securitization Model for Mexico and Current Strategy

V. Pension Funds & BORHIS

VI. Low-Income Mortgage Alternatives

VII. Challenges ahead in Housing Finance

9
The industry is still dominated by the two Federal Housing Funds,
INFONAVIT and FOVISSSTE.

About ¾ of loan originations still do not involve a private intermediary undertaking

at least part of the risk inherent to the transaction. FOVI/SHF has greatly diminished
its importance as the funding source for mortgages originated by private
intermediaries thanks to the development of the market.

Mortgages by Financing Source

INFONAVIT +
FOVISSSTE INF ONAVIT + F OVIS S S TE
84% 75%

SOFOLS S OF OLS B ANKS a nd

FOVI Funding BANKS S OF OLS
S HF F unding
13% 3% Own F unding
5%
2002 2006
20%

Total 341,939 Loans Total 675,041 Loans

10
INFONAVIT

The board of directors is represented by workers, employers and the Federal

Government.
INFONAVIT receives on a monthly basis, 5% of the formal private sector workers
payroll, and credits to personal accounts.
INFONAVIT loans, interest rates and payments are indexed to the minimum wage
(MW)*.
INFONAVIT interest rates are not market rates, there is an implicit interest rate
subsidy on all its lending.
INFONAVIT relies on payroll deduction for its collections when borrowers are
employed by firms in the private sector. Collection mechanisms for unemployed
borrowers or those migrating to the public or the informal sectors still need to
improve.
Average dollar amount of their loans: $22,000
* MW= usd$ 148.4 per month

11
FOVISSSTE

Similar to the objective and sources of funding from INFONAVIT, FOVISSSTE is a

wage-based housing fund for federal employees, and is the institution in charge of
providing housing financing to over two million of federal government employees.
The board of directors is represented by different government agencies and by
ISSSTE (the public pension fund for federal employees).
FOVISSSTE receives on a monthly basis, 5% of the federal employees payroll, and
also collects through a pay-roll deduction mechanism.
FOVISSSTE loans, like those of INFONAVIT, are indexed to the minimum wage and
pay lower than market interest rates; however to a greater extent.
FOVISSSTE lags behind INFONAVIT on revamping its operating procedures,
particularly regarding the servicing of the loan portfolio.

12
BANKS

Until 1994, banks were the only private intermediaries doing mortgages in Mexico.

In 1995, the “Tequila Crisis” bankrupted the Mexican banking system and private
banks abandoned the mortgage market. Past-due loans became rampant,
specially in the mortgage portfolio of banks. Banks did not have efficient collection
mechanisms or foreclosure procedures.

By 2004 it became clear to banks they had been out of a profitable market, and
they entered back aggressively by:
Undercutting Sofoles in price
Buying up the largest Sofoles
Banks originated approximately USD 7,300 millions of loans in 2007.

13
SOFOLES

Sofoles were created in 1994 as a result of NAFTA. They are Non-bank banks
similar to mortgage banks in US.

They have two basic characteristics :

 Cannot take deposits from the public.
 Can only lend to a specific sector: housing, automobiles, education, etc.
Since then, Sofoles have successfully been originating and servicing loans under
FOVI & SHF programs:
 Relatively homogeneous originating and servicing standards, as well as
standardized loan product.
 Sofoles will originate approximately USD 2,200 million of loans in 2007.

14
FOVI, which was manage by the Central Bank until the creation of SHF,
started funding SOFOLES in 1995.

Collections on
outstanding portfolio

Central Bank loans Construction loans

(guaranteed by the Sofoles for homebuilders
Federal Government) and mortgages for
individuals

Fovi’s funding to Sofoles was long term, fully

World Bank and matched and indexed to minimum wage inflation.
IADB Under the macroeconomic
environment after de “Tequila Crisis” this was the only source of
long term funding for mortgages.

15
 SHF started operations in 2002, overtaking the activities of FOVI but with a
new capacity to get funding from the capital markets.

MI is offered to prepare
SHF hedges market and prepayment risk
Local capital and loans for securitization
through debt and derivatives markets
international
derivatives
markets
Mortgage Insurance

MORTGAGE
Central Bank loans SOFOLES LENDING

World Bank &

IADB SHF funds SOFOLES on a matched funds basis,
absorbing market and prepayment risk

16
Contents
I. Introduction

II. Demographic Dynamics, Housing Demand and Financing Needs

III. The Mexican Mortgage Market including FOVI/ SHF role

IV. Securitization Model for Mexico and Current Strategy

V. Pension Funds & BORHIS

VI. Low-Income Mortgage Alternatives

VII. Challenges ahead in Housing Finance

17
Participation of SHF in the securitization model

SHF does not perform the same activities that Fannie Mae or Freddie Mac: it neither
purchases loan portfolios nor does it issue MBSs with its own Guarantee attached.
Instead:
SHF offers Mortgage Insurance covering the first loss of up to 35% of loans,
whether they are part of a pool of an MBS (BORHIS) or not.

SHF offers Partial Financial Guarantees to structures that meet certain

requirements. These usually do not cover more than 15% of MBS (BORHIS)
outstanding balance.

SHF supports the liquidity of the MBS (BORHIS) by continuously quoting bid-ask
prices (with tight bid-ask spreads) for every issue in the market. All this activity is
channelled through one of the eleven “BORHIS Market Makers”.

However, the goal of SHF is similar that of the GSEs: to foster the liquidity to the
mortgage markets as a means to promote the affordability of mortgages.

18
 How is the market organized to issue MBS (BORHIS)?
Depends on the
=
preferences of the issuer,
Mortgage Financial Guarantee but Mortgage Insurance
is necessary unless a
Insurance Insurance 100% Financial
Companies Company/Mezzanine Guarantee Insurance on
the MBS exists.
Mortgage Insurance Total or Partial Financial
PREMIUM (First loss up to 30%) PREMIUM Guarantee Insurance
and Mezzanine

Loan + Mtg.Insurance
AAAmx rated MBS
SPV
(BORHIS)
SOFOL or BANK (funded and Debt Markets
administered by
$
private entities) $
Mortgage $
SPV acquires mortgage
portfolios, structures and
BORROWER issues MBS (BORHIS)

19
The securitization Model

Two type of structures are being placed in the market.

Mortgage Insurance +
Partial Enhancement Full Financial Guarantee Insurance
(Partial Financial Guarantee or (without Mortgage Insurance)
Mezzanine Bond)

Assets Liabilities Assets Liabilities

Mortgage Senior Bond Mortgage Senior Bond

Portfolio Portfolio (100%) 88%
87%
(100%)
+
Mortgage Insurance

Equivalent May be
Mezzanine Bond to a Partial partially
10% Financial Equity substituted
Guarantee by a
Equity 3% 12% Mezzanine
Bond

20
SHF has been actively seeking the entrance of private providers of guarantees.
The end-game is a market based system relying on private providers of financial
solutions.
Investor and market
maker in initial and
secondary markets
SPV
Mortgage
Portfolios
Financial L
$
Intermediaries O MBS Capital Markets
•Banks A
•Sofoles N MBS
$ S
Financial
K Guarantee
Mortgage Insurance
Insurance

21
The number of participants in securitization has steadily increased, first Sofoles,
then banks by 2006 started to have an important participation

The number of intermediaries Scotiabank

participating in securitizations is
also higher every year. Bancomer Bancomer

In 2007, 3 banks have already HSBC HSBC

securitized their mortgages, and
we expect this number to keep Banorte Banorte Banorte
CyC CyC CyC
growing. Patrimonio Patrimonio Patrimonio
ING ING ING
FINCASA FINCASA FINCASA

GMAC (Patrimonio) GMAC Patrimonio) GMAC Patrimonio) GMAC Patrimonio)

GMAC (CyC) GMAC (CyC) GMAC (CyC) GMAC (CyC)

Metrofinanciera Metrofinanciera Metrofinanciera Metrofinanciera Metrofinanciera

GMAC (HIPNAL) GMAC (HIPNAL) GMAC (HIPNAL) GMAC (HIPNAL) GMAC (HIPNAL)

GMAC GMAC GMAC GMAC GMAC

Su Casita Su Casita Su Casita Su Casita Su Casita

2004 2005 2006 2007 2008

22
 Securitizing mortgages has proven to be a successful mechanism to originate
mortgages recurrently and at competitive rates
 Through 2007, we have witnessed important progress on the issuance of mortgage backed
securities:
 On 2007, $2,352 million USD were securitized, representing an increase of 107% of
the amount observed in 2006.
 And also on 2006, banks started working towards securitizing their mortgage portfolios,
managing to account for 33% of the issuance of BORHIs in 2007.
Amount Securitized
Issuances
(Million USD) Mortgages
Non-bank institutions (SOFOLES)
Total MBS issuance per year 2007 1,263 12 49,326
2006 950 13 30,926
Amount Securitized 2005 260 5 8,359
Years Issuances
(million USD) Mortgages 2004 250 3 9,562
2003 54 1 1,979
2003 54 1 1,979 Subtotal 2,777 34 100,152
2004 250 3 9,562
2005 260 5 8,359 Banks
2007 777 3 10,025
2006 1,136 14 34,857 2006 186 1 3,931
2007 2,352 17 59,351 2005 - - -
Total 4,052 40 114,108 2004 - - -
2003 - - -
Subtotal 963 4 13,956

Other Types of Issuances (Cross Border, BORHIs Repackaging, HiTo

Bonds)
2007 312 3 7,927
- - -
Subtotal 312 3 7,927

Total 4,052 41 114,108

23
 On 2007, the average size of issuances also increased, making BORHIs a
more appropriate instrument for institutional investors

Issuances increased their individual volume, averaging around $131 million

USD in 2007.

Average per Average per issuance (million USD)

issuance
Year % of increase 140
(million
USD)
120
2003 54 141%
2004 83 57%
2005 52 151% 100
2006 81 61%
2007 131 0% 80

Average 2003-2006 74 177%

60

40

20

-
2003 2004 2005 2006 2007

24
BORHIS offer very attractive yields to Foreign Investors:
YTM: BORHIS* vs. “Mexican Government Real Rate Benchmark”, “TIP’s + EMBI+”, TIP’s
(Dic-2003 – YTD)
7.0%

6.0%

5.0% 4.50%

4.0% 3.59%

3.0%
3.35%
2.0%
2.23%
Jun-04

Jun-05

Jun-06

Jun-07
Ago-04

Ago-05

Ago-06

Ago-07
Feb-04

Feb-05

Feb-06

Feb-07
Abr-04

Oct-04

Abr-05

Oct-05

Abr-06

Oct-06

Abr-07
1.0%
Dic-03

Dic-04

Dic-05

Dic-06
BORHIS* UDIBONOS** TIP's 20 yr + EMBI+
TIP's 20 yr TIP's 10 yr + EMBI+ TIP's 10 yr

By the end of 2007, Borhis mantained the same YTM in average.

*Weighted Average YTM (calculated, at each time, with the outstanding amount of each issue). Source: VALMER; Mexican
Price Vendor.
**Government Real Rate Benchmark (with similar duration to that of the BORHIS).
TIP’s = Treasury Inflation Protected Bonds; EMBI+ = Emerging Markets Bond Index (Mexico).

25
Today there are 11 Market Makers participating in SHF’s program to foster
the liquidity of BORHIS in the secondary market.

SHF acts through these institutions, and quotes prices both ways on every
security at very tight margins throughout the day.

26
There is a lot of room for efficiencies being translated into more affordable
mortgages.

FIXED RATE PESO POOL OF MORTGAGES SECURITIZATION

25%
Average rate on
First Loss + 14.00% mortgage portfolio
Mortgage Insurance
- 1.25% Servicing Fee

- MI
87% 0.85%
Senior security P&C and Life insurance +
- 1.10% structuring and
Mortgage
securitization costs
Portfolio
10% Mezzanine - 0.17% Mezzanine
Piece

3% Subordinated
- 8.34%
Funding rate for MBS
Security
= 2.29% Excess Spread

27
The BORHIs market is still on its early stages, so it is important to
correct and adjust some aspects in order to improve its efficiency

Some aspects must be strengthened to continue providing this market with

dynamism, sustained growth and security for the investor.
 Homologation and standardization of the periodic information reported by
servicers and trustees, aiming to add transparency to the analysis and
monitoring of the structures.
 Value the bonds in terms of prices instead of rates to provide simplicity to their
valuation.
 Establish a standardized public calculator to price the structures.
 Make structures homogeneous.
 Adjust the rules that define the characteristics of BORHIs to line up the
incentives and distribution of risks between participants.
 Adjust the operation rules of market makers.

28
In order to satisfy the demand of institutional investors and widen
the range of BORHIs available, different types of issuances have
been promoted:

We have worked to generate a great variety of types of BORHIs with the objective of
attracting different investors through diverse tranches.
Likewise, SHF participated in the creation of Hipotecaria Total (HiTo), a company
that allows the securitization of mortgages at real time, in a similar way as the
Danish model.
We are supporting Covered Bonds as another securitization option.
These schemes offer different options for both, investors and issuers.

29
Contents

I. Introduction

II. Demographic Dynamics, Housing Demand and Financing Needs

III. The Mexican Mortgage Market including FOVI/ SHF role

IV. Securitization Model for Mexico and Current Strategy

V. Pension Funds & BORHIS|

VI. Low-Income Mortgage Alternatives

VII. Challenges ahead in Housing Finance

30
Mexico Pension Funds System

Individual
Pension Fund
Account* PRIVATE
EMPOYER
AFORES
Pension administrator
PUBLIC
EMPOYER
$

SIEFORES
$$$

Pension Investment Fund

* Mexican pension funds have
 Invests Pension Funds an investment portfolio of
 Regulated by CONSAR who defines investment policies around $79,000 Million USD
(8.21% of the GDP in Mexico)
31
SIEFORES & BORHIS: matching necessities

One of the aim objectives of the SIEFORES is to invest the income of pension
funds in order to obtain the best returns with financial instruments that comply with the
regulator investment policies.
Taking into account that pension funds look for a long term basis investment, there
is a need for long term financial instruments to match the necessities of the pension
saving accounts.
The regulator of SIEFORES establishes strict conditions for the type of financial
instruments that could comply with the pension funds portfolio.
BORHIS are an attractive investment option for SIEFORES in terms of:
Risk Level
Term
Quality of the bond & bond underlying
Timing of the issuances

32
SIEFORES & BORHIS: matching necessities

The 70% of BORHIS investors is distributed within SIEFORES, Banks and stock
exchange specialists.
The participation of BORHIS within the SIEFORES portfolio represents the 1.7%

BORHIS HOLDERS Although the

participation of BORHIS in
7% 2% the SIEFORES portfolio is
20% 37%
important, the % of such
bonds is limited.
19% 15%
SHF is working together
SIEFORES BANKS
with CONSAR to increase
SHF Stock Exchange specilists the % of participation of
INSURANCE CO Others MBS.

33
Contents

I. Introduction

II. Demographic Dynamics, Housing Demand and Financing Needs

III. The Mexican Mortgage Market including FOVI/ SHF role

IV. Securitization Model for Mexico and Current Strategy

V. Pension Funds & BORHIS|

VI. Low-Income Mortgage Alternatives

VII. Challenges ahead in Housing Finance

34
In order to prevent the low-income population from living in irregularity or illegality and in stark
conditions, it is necessary to provide it of housing.
Historical Mortgage Loans1

The interest rates decrease observed

during the last years has benefited
the mortgage loan market.
Housing Demand by Income Level2

Housing Demand
Potential Market (Houses)

Target Segment
Attended Segment
This has traduced into an increase of the
housing supply and demand, as well as of
mortgage loans. However, the main
beneficiaries have been the formal workers.
The housing supply for informal and/or low-
income workers is still too limited.
Familiar Income in Mimimum Wages

New mechanisms should be created in order to supply housing to this segment of the market,
which represents more than 80% of the population. To attend the low-income and informal
workers, this market should be provided of attractive characteristics to constructors.
1
Source: Softec, “Mexican Housing Overview 2006”
2
Source; Softec, “Mexican Housing Overview 2006” and figures from SHF

35
In spite of the development of the mortgage market and of the diminish in the interest rates, the
increase in the prices of houses has not allowed the low-income sector to be benefited.

 The government has established the need to generate 6 million mortgage loans during the period
2006-2012, which traduces in 339,762 acres of urban ground with the required infrastructure and
equipment*.

 In Mexico, many urban development programs have been carried out. However, the following is
necessary to benefit the low-income population:

 The State and Municipalities should influence the type of housing that the constructors build.

 Alternative financing sources for the development of infrastructure should be explored.

 The urbanization process – equipment of land, construction of housing, and individual sales
- should be enhanced in order to reduce the cost of land and to give access to housing to
the low-income population.

To give access to quality houses to the low-income population, the participation of the States
and Municipalities is needed, as well as the creation of attractive conditions for the
investment of constructors in social housing.
*Source: Softec, “Mexican Housing Overview 2006”

36
Participation of Constructors in the Housing Market

One of the problems regarding the lack of attention to the low-income market consists in the fact
that the constructors found this segment less profitable and more risky. The typical cost structure
for constructors according to the market segment is showed below. *

The costs of investing in

social and economical
% with respect to sales

housing are duplicated with

respect to the residential
housing costs. The
contrary happens with the
profit margin.

Concept / Housing Type Social Economical Middle Residential Plus

Profit Margin (before taxes) 10% 10% 15% 18% 20%
Unforeseen Expenses 5% 5% 5% 5% 5%
Financial Costs 8% 8% 6% 4% 4%
Sales and Merchandising 5% 5% 5% 5% 5%
Administrative Costs 4% 4% 4% 4% 4%
Project and Supervision 4% 4% 4% 4% 4%
Processes and Licenses 2% 2% 2% 2% 2%
Construction 40% 40% 39% 38% 33%
Infrastructure 14% 12% 8% 5% 3%
Ground 8% 10% 12% 15% 20%

*Source: Softec, “Mexican Housing Overview 2006” 37

SHF has, among its objectives, the promotion of accessibility to housing. As a result, it has
taken an active role in the development of ground that can be used for the development of
social housing.

SHF, in coordination with BANOBRAS and several Financial Institutions, has defined and
implemented different projects known as “Macrodesarrollos”. These have the objective of
creating management and financing methodologies for the States and Municipalities in order
to generate low cost housing in a sustainable environment.

These “Macrodesarrollos” consider the creation of:

 A self-sustainable city, adjacent and complementary to the already existent one, that
offer jobs and services to the population –health, education, diversion, transport, etc.-
(avoiding to create dorm cities or isolate urban developments).
 Spaces that allow housing meant to all social classes (providing urbanized and well
located grounds).
 Public spaces that allow to develop a communitarian life – centers and sport areas,
among others-.
 Spaces for the environmental protection and enhancement.
 Open spaces for primary activities – agriculture and farming-.
 Legal and political certainty that will allow to offer housing at lower costs.

38
 To improve the access to mortgage loans, all participants and markets developed for the
Residential Mortgage Backed Securities should be directed to the steps currently
unattended and to the low-income population.
All the advances achieved in the market and the products developed by SHF to promote the Residential
Mortgage Backed Securities, should be used to attend the steps in the chain that are actually
unattractive.

Acquisition of Primary Sale of Urban Construction Sale of Mainte-

ground Equipment Houses
Infrastructure Ground of houses nance

Current Cover
Current Participation of SHF
Housing Demand

6 a- 25 Mimimum Wages
Securitization
• Investors
Future Cover • Mortgage insurers
0 - 5 Mimimum Wages • Financial guarantors
• Structuring agent

Future Participation of SHF

39
The advantages of this model can be observed in three
different directions:

States and Municipalities

 Obtain a financing source to promote an ordered urban development.
 Line up the constructors’ interests with the urban development planning.
 Stimulate the development of social housing projects.
 Is an important instrument to confront the illegal development of cities.
 Besides, the States and Municipalities might attend the low-income population,
subsiding the land for social housing through the urbanization of ground.

Low-income population
 Urban developments with adequate equipment, services, employment sources, and
infrastructure linked to public spaces.
 Access to houses with infrastructure, at regular prices and with the possibility of
obtaining credits and subsidies.

Urban Developers
 The State or Municipality will guarantee the legal security of the project, as well as
its basic infrastructure and urbanization.
 Permissions and licenses are previously granted. Urban design and
individualization scheme with loan products of SHF, INFONAVIT, and other entities.
 Obtain financing for business lines that were previously unfeasible.

40
Contents

I. Introduction

II. Demographic Dynamics, Housing Demand and Financing Needs

III. The Mexican Mortgage Market including FOVI/ SHF role

IV. Securitization Model for Mexico and Current Strategy

V. Pension Funds & BORHIS|

VI. Low-Income Mortgage Alternatives

VII. Challenges ahead in Housing Finance

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Challenges ahead in Housing Finance

To attend the population that has not been attended, SHF has the following
actions to achieve:

 Strengthening and consolidating the Residential Mortgage Backed

Securities Market.
 Promoting the entrance of new specialized financial institutions in the
unattended sectors: microfinance institutions, non-bank banks, and
savings and credit institutions.
 Developing of adequate products for these markets: savings and leasing.
 In coordination with other housing institutions, adjust the Program of
Subsidies to extend the access to mortgage loans.
 Development of financial markets to attend the financing of infrastructure,
equipment, and maintenance of the production of sustainable housing.
 With respect to the previous point, SHF will take advantage of its
experience in the development of securitization markets to securitize the
franchises and flows of these Macrodesarollos.

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 Contacts:

Paloma Silva ‘msilva@shf.gob.mx

Edith Castro ‘ecastro@shf.gob.mx

1 de dic de 2023