In a move that could help jump-start Mexico's asset-backed market, homebuilders Consorcio Hogar and Corporacion GEO are mulling what will be the first securitizations of income deriving from low-income housing projects.
The projects are commissioned by the Institutio del Fondo Nacional de la Vivienda para los Trabajadores (Infonavit), a government-sponsored housing program that provides subsidized mortgage loans to lower-income households.
Though specifics about the deals were unavailable, Consorcio Hogar is rumored to be looking for approximately P450 million ($47.5 million). The offerings are expected during the first half of the year.
"By securitizing housing projects, builders such as GEO and Consorcio Hogar will be able to liquidate some of the assets in their books, refinance some of their debts and obtain cheaper financing for their projects," said Eugenio Lopez, at Fitch IBCA in Mexico.
Lopez added that GEO's and Consorcio Hogar's groundbreaking deals could propel other players into the market.
"Securitization is still a relatively new concept in Mexico. But things are changing. The market is becoming more comfortable with this instrument and institutional investors have an appetite for low-risk, high-rating paper. I believe that the conjunction of these elements will bring more deals to the market."
Though the outlook is positive, there is still a lot of work to be done. "This is a very important move that will attempt to bring local pension funds into the long-term paper market," said Pedro Rienoso, director of Financiamiento Azteca, a consulting firm working with Consorcio Hogar. "But for these deals to bear fruit, the issuers need to work closely with local pension funds in order to come up with a structure that will be well received."