Attracting smaller investors in Brazil to certificate of real estate receivables (CRIs) has been a challenge due to the lack of a secondary market and a host of criteria — including concentration criteria — that originators must follow to issue CRIs smaller than R$300,000 ($184,000).

The construction companies that are the main originators of CRIs generally cannot meet this criteria and thereby issue only in volumes out of retail investors’ reach, a source said.

Brazil’s leading mortgage originator Caixa Economica Federal was able to sell bonds in parcels as small as R$1,000. It did not have to meet the criteria since it was able to disclose loan-level borrower information.

Today Caixa closed the R$232.8 million senior piece of its largest ever RMBS, said a source close to the transaction. The yield came to 10.5% over the TR, a benchmark savings rate.

Before Caixa, the only way retail investors could gain exposure to CRIs in Brazil was to buy shares in real estate investment funds (FIIs), closed ended vehicles that resemble REITs in some ways, although they are not organized as companies or trusts. FIIs are generally divvied up in pieces as small as R$1,000 but can be even smaller. Prior to Caixa, an FII holding CRIs was the most viable way for Brazilian retail investors to tap into a CRI.

Because of its large size — Caixa is by far the biggest originator in the market — players have said that if it were to successfully tap a retail base for its RMBS, it could create the beginnings of a sorely needed secondary market for the product.

“I think that this is one of the greatest problems in terms of the investors of CRIs, making the secondary market more widespread,” said Paulo Baroni, managing partner at Portfolio Asset Management.

Another idiosyncrasy of the Caixa deal is that it is tied to the TR rate. Typically fixed-income deals in Brazil price off other benchmarks such as the CDI overnight rate or the IGP-M inflation index. The latter is the case for most CRIs. The TR is often so low that whatever is benchmarked becomes essentially a deal with a real interest rate plus a small annual margin, typically close to 100 basis points.

“It’s almost like a fixed-rated deal,” said Pedro Junqueira, a managing partner at Uqbar, a consultancy focused on securitization. “TR has obviously a track record that goes back because it’s the benchmark for savings deposits.”

Players expect commercial banks to follow Caixa’s lead, especially given a recently enacted rule that reduces a disincentive to issue CRIs. Banks in Brazil have long been required to hold the equivalent of 65% of their savings deposits in real-estate related assets. This has worked against the issuance of CRIs. But now mortgages that are sold through a CRI can still fulfill the rule, although at an increasing discount. The amount the sold mortgages that count as a real estate asset for the purposes of the 65% rule is discounted by 1/36 each month, until it is entirely written off at the end of the third year.

A government-owned bank, Caixa originated R$14.7 billion in home loans in the first quarter of 2011. Lending has been growing briskly over the last several years.

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