Last week, Genworth Financial became the first foreign mortgage insurer to enhance an RMBS in Mexico in the primary market by providing insurance that covered up to 25% of the principal and accrued interest of the most recent deal from originator Su Casita, according to sources close to the deal.

But the company has yet to open an office in Mexico. Until it does, insurance it provides domestically will require special approval from the government's Secretary of Finance and Public Credit. "The law allows us to approve insurance case-by-case," said Jose Antonio Gonzalez, director general for insurance and securities in the Finance Ministry. He added no foreign provider of mortgage insurance has set up shop in Mexico because the license to do so has yet to be put in place. "It will take another month or so," Gonzalez added. Mexico's legislature approved a law regulating non-government providers of mortgage insurances in April.

Genworth officials couldn't be reached for comment in either Mexico or the U.S., but sources indicated that the company expected to open an office soon. "They're in the process of authorization to start up a Mexican unit," said Luis Enrique de la Pena, associate director of Fitch Ratings in Mexico.

Genworth, along with AIG United Guaranty, have participated in the Mexican market by re-insuring insurance provided by government agency Sociedad Hipotecaria Federal, which had been the only provider of MI in the primary market until the Su Casita deal.

Apart from the Genworth enhancement, the Su Casita transaction was also singular for its tight spread and timing, having apparently been the first structured deal to come out since the contentious presidential elections of July 2.

Sized at 252 million inflation indexed units (UDIs) ($85 million), the senior piece was priced at 5.45%, a spread of 107 basis points over the government's Udibono. The spread was the thinnest achieved by any bond this year, according to Mark Zaltzman, deputy head of corporate finance at Su Casita. All three leading rating agencies gave the senior tranche triple-A on their respective national scales. The legal final is 29 years.

With the same legal final and amounting to 28 million UDIs, a subordinated piece priced at 7.13%. Fitch Ratings, Moody's de Mexico, and Standard & Poor's, rated that tranche A+(mex)','A2.mx', and mxA' on their respective national scales.

Summer chill over issuance

Mexico's pipeline looks congested with deals. But it remains unclear how quickly issuers will follow Su Casita's post-election lead in the current political climate, though sources said issuers are ready to move on. Supporters of leftist candidate Andres Manual Lopez Obrador held protests last week where they blockaded key arteries of Mexico City. Obrador continues to call for a recount of the vote, in which he lost to Felipe Calderon by the slimmest of margins.

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

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