Colombia's main mortgage securitizer is set to chip away at the mountain of non-performing loans that has burdened the country's banks since the '90s. Roughly a year after announcing its plans, Titularizadora Colombiana expects to issue the country's first NPL-backed deal within the next two months. "In terms of envisioned structure and regulations, we're pretty much done," said Mauricio Amador, vice president of Titularizadora. The size of a senior tranche is projected to be no less than Ps150 billion (US$56 million), with a hefty subordinated piece.
The denomination will be in UVRs, an inflation index widely used for mortgages.
Some 23%, or about Ps2 trillion (US$749 million) of total outstanding mortgage volume in the country is more than three months delinquent, according to the Web site of the Colombian Institute of Savings and Housing, known as ICAV. The figure has oscillated between 21% and a hair over 25% since 2001.
The next step for Titularizadora is to purchase the loans from three targeted banks, Conavi, Colpatria and AV Villas. The loans will be more than one year delinquent, and the cash flow for the deal will come primarily from foreclosures as opposed to partial payment, according to Amador.
Servicing these loans and ensuring foreclosure will differ from the typical approach in the U.S., where specialized entities away from the originator often assume that role. "So many of the banks here faced delinquencies of 25% of their portfolios after the crisis of 1998-1999, that they mounted their own networks [for servicing]," Amador said. These networks often include credit collection agencies specialized in the field, but they are always part of the originator family.
In terms of maturity, Titularizadora projects tenors of five and seven years for the NPL-
Work in the non-performing sphere has somewhat delayed issuance of Titularizadora's fifth standard RMBS, now slated to come out in the second half of the year. Amador said the agency could still squeeze in a sixth series for 2004. In its first two years of issuance, the agency issued a single series each semester.
Colombia suffered a financial crisis beginning in 1998. One of its manifestations was a leap in LTV ratios in the mortgage sector, occasioned by a lethal combination of a steep rise in household debt, indexing rules for mortgages and the erosion of real estate values from 1995 onward. The resulting sharp contraction in origination exacerbated the situation by boosting unemployment, which further weakened the capacity of borrowers to pay. While the jobless rate has ticked downward since the late 1990s, it remains in the upper teens.