GMAC Financiera recently closed a deal with the International Finance Corp recently that will lend traction to the secondary-mortgage market coming to life in Mexico. Out of a total financing by the IFC of $115 million, a revolving credit line for $65 million can be used to fund GMAC's RMBS warehousing conduit, the first of its kind in the country. "It's important to find players that are willing to foster a secondary market in Mexico," said Jose Landa, managing director of GMAC-RFC in that country. GMAC Financiera has already purchased mortgages from other originators for securitization, backing one deal last year with loans from six fellow originators and another with loans generated entirely by Hipotecaria Nacional.
The IFC, for its part, is keen to strengthen this area. "We see this as a critical time to spur the development of the secondary mortgage market," said James Scriven, head of new business in Latin America at IFC's global financial markets division.
The financing package also includes a $50 million credit enhancement facility that GMAC Financiera can use to guaranty a securitized bond or to purchase a subordinated tranche, according to Landa. He added that the facility can be spread among several deals.
Landa expects to see more fragmentation in the Mexican RMBS market, as players leverage each other's strengths. "Participants are dividing up [the market] according to their area and degree of specialization and depending on the risk appetite each has," he said. In many ways, the RMBS market is still in the early stages of evolution and GMAC Financiera will continue to tinker with structures to find the best combination of efficiency and suitability to Mexico's particular circumstances. "We're always fine tuning," Landa said. "Each of our first three deals was slightly different."
The downgrades that have hit Mexico's GMAC units in the wake of the parent company's troubles have not dampened Landa's outlook. "Evidently it's led to a rise in the cost of financing our corporate debt, but in Mexico, we're in such a promising market and what we're doing here as a warehouse lender, it's unique," he said. "The fact that the IFC is involved attests to that."
Prompted by the downgrades of the Mexican units, Standard & Poor's issued a report last month saying that the originator's asset-backed transactions should remain unaffected. Even as a servicer, GMAC's problems couldn't contaminate its ABS, the agency said, since the deals contain provisions for substituting the servicer for another if it has been failing to meet its obligations. At any rate, the agency noted that the credit rating of a servicer doesn't have a direct impact on its servicing rating, which is grounded in managerial capacity, organizational structure, and management of assets.
As the Mexican RMBS market grows up, new institutions could emerge along the lines of Fannie Mae or Colombia's Titularizadora, whose primary business is to purchase and securitize mortgages. "We see many positive signs pointing in this direction," said Kenroy Dowers, senior housing specialist in the IFC's global financial markets division. He added, that Mexico is perched at the first stage of development of a potentially large and vibrant secondary mortgage market and in this stage, issuers are experimenting with different models for building a vibrant mortgage market. "None of the models in other countries has proven that one is more effective than the other," said Pablo Martelli, IFC manager for Mexico and Central America. "Maybe Mexico's approach is to explore different possibilities and let the market decide which is the most effective for their market conditions."
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