No matter how you slice it, the Mexican securitization pie swelled to an unprecedented size in 2006. Deals in the domestic market totaled the local currency equivalent of $6.0 billion.

According to Standard & Poor's, excluding a gigantic 2005 collateralization of loans linked to federal bank IPAB, domestic ABS and MBS volumes ballooned about 130% in 2006. What perhaps most stood out last year about this fast-growing market was its resilience in the face of political uncertainty. Contentious elections in early July led the market to pause for only that month; even without a definitive resolution on the vote, pent-up supply spilled back into the market in August. It hasn't let up since.

"What we saw is that the market was preparing for a pause, but there was only a small break and then a quick rebound in August," said Maurico Tello, a rating specialist at Standard & Poor's in Mexico.

Housing finance stood firm as one of the Mexican market's pillars in 2006. An assortment of originators came to market with deals backed by residential mortgages and bridge loans for construction. Apart from the usual suspects like Su Casita and Metrofinanciera, Credito Inmobiliario made its debut bridge-loan deal and Comercial America securitized mortgages for the first time. At least one bank also edged its way into territory that nonbank housing finance companies had been monopolizing. Banco Mercantil del Norte (Banorte) issued an RMBS, an event that some say could usher in similar deals from Mexican banks that had traditionally kept mortgages on their books.

Elsewhere in housing finance, Metrofinanciera closed a mortgage warehousing facility with Deutsche Bank for the local currency equivalent of $175 million. With a guaranty from the Inter-American Development Bank, that deal was understood to have garnered a double-A rating on the local currency global scale, the highest achieved by such a funding arrangement in Latin America.

In 2006, Mexico also witnessed a first-of-its-kind CDO issued into the domestic market. Finding itself overly exposed to public credit risk, Banco del Bajio offloaded nine loans to subsovereign borrowers and state companies in a Ps4.4 billion ($400 million) deal.

Federal co-participation revenue - money that the central government parcels out to states and municipalities - was one asset class that failed to impress in 2006. Only the Federal District, basically the area of Mexico City, and the state of Nuevo Leon collateralized their co-participation revenue, an area that helped the securitization market get off the ground a few years ago. Vehicle taxes and toll road receipts were also securitized by sub sovereign issuers in 2006.

(c) 2007 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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