Snags mandate from top Sofol Hipotecaria Nacional

In the latest sign that international players new to the Mexican housing sector are keen to grab a share of the nascent RMBS market, Citigroup has won a mandate from Hipotecaria Nacional, the largest of Mexico's private housing finance companies, known as Sofols. Credit Suisse First Boston led the first proper RMBS last December, and UBS Warburg and BBVA Bancomer are jointly bringing the second this week. None had been involved in the construction bridge loan deals that defined the sector prior to CSFB's deal; those transactions were the province of local IXE and foreigners Santander and Deutsche Securities.

Citigroup unit Acciones y Valores (Accival) will most likely bring the upcoming deal to market given that it will probably be domestic. Still, the New York office is actively engaged in the structuring, according to sources. This hands-on approach from headquarters departs from previous securitizations that Accival has executed in the sub-sovereign sector, including a Ps2.5 billion (US$226 million) transaction for the Federal District.

In those deals, the Mexican unit went it alone. But the RMBS sector is different, a source said. "Anything that you would see in the U.S., we'd leverage the expertise of the U.S. guys," said a source at the group.

As such, this would also apply to asset classes outside of the housing sector, such as auto loans. So far, Accival has concentrated on sub-sovereign deals backed by federal co-participation revenues, an area where U.S. bankers would probably have little to offer.

Hipotecaria Nacional had assets of Ps25 billion (US$2.3 billion) as of October; the next largest Sofol, Su Casita, had Ps16 billion (US$1.4 billion), according to information from the sector's trade group, AMSFOL. Nacional wields a market share of about 28% and has the highest loan loss reserves in the market.

On the other hand, like the rest of the industry, it remains highly dependent on state agency Sociedad Hipotecaria Federal (SHF) for its funding.

The upcoming deal will represent Nacional's first efforts to wean itself off SHF financing for mortgage origination. For more than a year, the SHF has been slowly retreating as a Sofol piggybank and alternatively promoting itself as a bond guarantor.

The entire sector in Mexico is clipping briskly along, and Nacional is no exception. This top dog originated 94,934 mortgages during the first three quarters of 2003, from 72,859 loans during the entire 2002. Breakneck growth in housing demand is fueling the industry.

Last year, Nacional securitized a total Ps1 billion (US$90 million) in two deals backed by bridge loans for construction. Moody's Investors Service and Fitch Ratings have rated the corporate' and BBB+(mex)' on the national scale, respectively.

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