The mortgage market is still brewing in Mexico, as Hipotecaria Su Casita launched its second mortgage-backed securitization.

Like the transaction completed in June 2000, the mortgages for middle-income housing have not yet been originated. The deal provides a two-year revolving period in which time the proceeds are released as the loans are made. If by some chance the mortgages are not originated within those two years, the money that is left over in the account is used to pay the bondholders. "There is great likelihood that in a two year revolving period Su Casita will be able to originate $10 million dollars [of] middle income mortgage loans," said Brigitte Posch, an analyst at Moody's Investors Service.

Moody's provided an Aa2.mx national scale rating, which is said to reflect the strength of the structure. Su Casita was the first Sociedades Financiera de Objeto Limitado (SOFOL) to be created in Mexico to grant loans under Fondo Operacion y Financiamiento Bancario de al Vivienda (FOVI) financing programs. FOVI and Instituto Nacional del Fondo para la Vivienda de los Trabajadores (INFONAVIT) are the state-owned entities that currently provide low-income housing for low-income sectors of Mexico. Unlike FOVI and INFONAVIT, who only provide funding, SOFOL will originate and service the loans and SOFOL will accommodate middle income housing, not just low-income housing.

According to Posch, since the first MBS deal launched just last year and the portfolio, at 66 loans, is considered too small to be a model, Moody's used the performance on the low-income loan portfolios as a benchmark. "Moody's looked at the delinquencies and defaults of the low-income portfolio to see how Su Casita is servicing the loans. If low-income portfolio is being serviced efficiently, then the middle income portfolio should have the same or better performance," Posch said.

Separately, the Sociedad Hipotecaria Federal, the Mexican GSE similar to the U.S.'s Fannie Mae or Freddie Mac, is still awaiting approval from the Mexican congress.

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