Plans for Argentina's new Secondary Mortgage Market Co. are well underway. The International Financial Corp. recently announced that it will contribute up to $50 million for up to 20% equity and a commitment of $100 million in credit enhancements to help support up to $1 billion of mortgage-backed and corporate debt securities of the new company.
In addition, the IFC agreed to mobilize further financing from private banks that will help originate and warehouse mortgages for eventual sale to the SMMC.
The Fannie Mae-style company aims to provide more affordable financing to homebuyers and to help develop the local financial markets by acquiring mortgages and packaging them into fixed-income securities (ASRI 1/3/00 p. 2).
The SMMC's main sponsor is Argentina's largest bank and most prominent MBS player, Banco Hipotecario Nacional. "It made sense to start with BHN because of their prominent place in the market," said a source. "They have done several international deals, they are sophisticated and they have the largest mortgage portfolio."
Merrill Lynch and J.P. Morgan have teamed up to lead the SMMC's first deal, which will be shopped to institutional investors and commercial banks. "The deal hasn't been structured yet," said a source familiar with the transaction. "But now that the company has the IFC's formal commitment and the approval of the Argentinean authorities things will pick up some speed."
If the SMMC proves successful, other Latin countries could follow. "This is a model that works in the U.S.," said a banker. "If it works in Argentina it could be used as a template for other countries in the region."
Secondary mortgage corporations have spread throughout the world in recent years, as governments look enviously at the liquidity provided to the U.S. mortgage market by Fannie Mae and its cousins. Secondary mortgage institutions have been set up in Hong Kong, Thailand, South Korea, India, (see story on page 3) and South Africa. Other countries are expected to follow suit.