Brazil's 2001 securitization schedule is well under way with a much-anticipated roll out of a secondary mortgage market. After establishing new regulatory tactics, the country has finally seen its first mortgage-backed securities deal, with two more to follow on its heels this week and three more in the pipeline.

Brazilian Securities Series 2001-1 totaled $2.08 million. The class A notes, for roughly $1.8 million, were given a national scale rating of Aa1.br by Moody's Investors Service, and the much smaller B-class and the certificates were not rated.

While a senior subordinated structured transaction almost seems like an everyday occurrence in the U.S., until now it has been unfamiliar territory for Brazil. Brazilian Securities, the second securitization company formed in Brazil, was created under the new regulatory system Sistema Financeiro Imobiliario (SFI).

A source close to the deal previously told ASRI, "The involvement of the InterAmerican Investment Corporation (IIC), a multilateral organization that is part of the InterAmerican Development Bank (IDB) makes the deal rather interesting. The IIC will purchase the Certificados de Recebiveis Imobilarios (CRIs or Mortgage-Backed Securities), worth US$10 million, in order to begin the development of a secondary mortgage market. The IIC will then sell the securities to the local Brazilian market and the revolving line will be open for another MBS deal." (ASRI 10/23/00 p. 1)

Two deals are expected to follow this week. The Brazilian Securities 2001-2, expected to be in the amount of $6 million, has a Aa1.br national scale rating from Moody's. The transaction is still under the old law and therefore has an 18% subordination.

The third transaction, Brazilian Securities 2001-3, for $1.5 million, also has a Aa1.br national scale rating from Moody's and is expected to close this week. However, this deal is a bit different as it is backed by a pool of restructured mortgage loans and therefore has a subordination of 40%.

Additionally, there are three more deals like these in the pipeline. The first is expected to be another non-performing loan deal and will likely follow a similar structure to Brazilian Securities 2001-3.

According to sources, now that the SFI has been established there will be relatively small deals in the market as the learning curve improves. After July, volume is expected to increase substantially.

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