Despite its stature as Mexico's third largest mortgage originator in the private sector, Credito y Casa has kept RMBS at arm's length, letting its peers pioneer the business domestically over the last couple of years and limiting its involvement to selling a package of loans for GMAC Financiera to securitize.

But CyC is now ready to make its mark.

"We'll be active this year," said Augustin Gomez del Campo, head of funding for the company. "In the first half of February, we'll be doing a deal very similar to what's already out in the market."

The transaction, currently structured as a 30-year RMBS for Ps600 million ($57.3 million), will launch a four-year program totaling Ps4 billion, with Ps2 billion planned for this year. Acciones y Valores Banamex, a unit of Citigroup, is arranging the opening deal.

Three other Sofols, as Mexico's non-bank financial entities are known, have been building an RMBS sector since December 2003, when Su Casita and GMAC Financiera issued a debut joint deal. Metrofinanciera became the third Sofol to float an RMBS last June. During those first steps in Mexican RMBS, the sector was not on the agenda for CyC, Gomez del Campo said.

The company's initial RMBS will hold a partial guaranty from the Sociedad Hipotecaria Federal, a government agency that, over the last few years, has been migrating from providing direct loans to Sofols to giving ancillary support such as partial guaranties.

As a servicer of mortgage loans, CyC was recently greeted with unwelcome news. In late December, Moody's Investors Service cut the Sofol's servicer quality ratings to SQ3 from SQ2, citing an increase of both early-stage (one to 89 days) and late-stage (90+ days) delinquencies from historic levels. The vintages hit hardest were 2003 and 2004, which combined account for nearly 40% of the Sofol's servicing portfolio of mortgage loans, according to Moody's.

The move came after Standard & Poor's dunked CyC's servicer rating to Average from Above Average in late September. The agency pointed out that CyC had nonperforming loan data and delinquency ratios that exceeded the industry average.

Gomez del Campo said the company was working on improving its delinquency ratios. S&P and Moody's pointed out that the company was implementing a new service system designed to reduce delinquencies.

CyC originates between 12,000 and 15,000 mortgages annually. It had assets of Ps19 billion as of June 2005. Total assets of mortgage Sofols hit Ps129.5 billion that month.

While unversed in RMBS, the company was one of the first issuers to securitize bridge loans for construction, another asset class originated by Sofols. The company issued a two-tranche, five-year deal for Ps1 billion in March 2003. The transaction introduced the domestic structured finance market to Dutch development bank FMO, which provided a 7.2% partial guaranty. Moody's and S&P rate that transaction Aaa.mx' and mxAAA,' respectively.

But CyC hasn't issued a bridge loan ABS since its debut, translating into a nearly three-year absence from that business.

"We didn't need the funding for bridge loans," Gomez del Campo said.

He added that the Sofol seeks to return to that market during the first half of this year.

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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