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The Expansion and Powered By Docstoc
					EVOLUCION DE LA CARTERA




                                                            Hipotecaria Su Casita S.A. de C.V.
             The Expansion and
             Future of Sofols in
                  Mexico

      Housing Finance Systems in Emerging Economies
                World Bank Group Conference
    Session 3 The Role of the Specialized Housing Lenders
                           March 15
                   Manuel Campos Spoor
                    Hipotecaria Su Casita
Su Casita’s profile

• 120,000 mortgages in
  the last 10 years.
  Current portfolio 105,000.
• Financed the construction
  of 160,000 new homes.
• 22,000 new loans in
  2005.
• Active in Infonavit
  cofinancing and Fovissste.
• US$3B portfolio under administration.
• Average loan US$30,000, average income of client $1,000.
• Over 130 offices in Mexico and the US.
• Total issuances in 2005 US$711 MM including mortgage
  and Construction loans securitization and Cross Border
  Construction loan issuance.
Housing Finances Systems in Emerging Economies
Session 3: The Role of the Specialized Lender
World Bank Group Conference
                                         PLANECIÓN
What is a Sofol?

• The Sofols (Sociedad Financiera de Objeto Limitado) were born
  in 1993 as a result of NAFTA, with a limited scope. Next Mexico
  entered its’ worst economic crisis in history.
• In the last 13 years they have been a success story granting
  over 13 MM loans and represent 10% of Mexico’s
  financing.
• They are specialized financial institutions that grant
  Mortgage, Consumer, Automotive, Agricultural and other kind
  of loans (i.e. Working Capital).
• For the past three years they have successfully competed
  with commercial banks that have returned to the market.
• The current administration has decided to deregulate the
  sector and eliminated the limited scope restriction. The
  Sofols have to decide: “What do to do when we grow up”
Housing Finances Systems in Emerging Economies
Session 3: The Role of the Specialized Lender
World Bank Group Conference
                                         PLANECIÓN
1994 worse than 1984

• In the NAFTA negotiation the figure was created.
• The Mexican financial system was dominated by commercial
  banks that channel 76% of all resources.
• When Mortgage Sofols started operations no sources of
  funds existed (One time loan right auction).
• In December 1994, the “Tequila Crisis” resulted in the
  biggest economic crisis in history and a collapse of the
  Mexican Banking system (Opportunity).
• Opportunity. The Sofols, which were just starting operations,
  were not affected by the crisis (No loans). In the case of the
  Mortgage Sofoles we became the sole intermediary of FOVI
  (Now SHF) as the banks closed all their mortgage programs.
        1994 was bad for some and good for Sofols.

Housing Finances Systems in Emerging Economies
Session 3: The Role of the Specialized Lender
World Bank Group Conference
                                         PLANECIÓN
Present Situation
                                                                                  Numbe r and Portfolio of Sofols
• There are 58 Sofols that                                    70                                                                      25

  manage a portfolio of                                       60
                                                                                                                                      20

  US$20B, 2.6% of GDP.                                        50




                                                                                                                                           US Billion
                                                                                                                                      15




                                                     Number
                                                              40

• Mortgage loans                                              30                                                                      10

  represent 63% of balance.                                   20

                                                              10
                                                                                                                                      5


• 3.2 MM loans were                                            0
                                                                   1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
                                                                                                                                      0


  originated last year, mostly                                                           Loan Balance     Number

  personal and working
  capital loans.                                                                     Sofol by Specialization

                                                              20
• 30% of funds come from                                                                                           Mortgage

  issuances in public markets                                 15
                                                                                                                   Automotive

  and less than half from                                     10                                                   Consumer

  development banks.                                           5
                                                                                                                   Agricultural

                                                                                                                   W orking capital and
                                                               0                                                   other
                                                                          1994                2005

Housing Finances Systems in Emerging Economies
Session 3: The Role of the Specialized Lender
World Bank Group Conference
                                         PLANECIÓN
Participation in Financial Sector

• The Sofols are a significant player in the market. They
  represent 10% of credit.
• They serve the middle and lower market, more than 50%
  of clients have incomes below 8 MW.
• In the case of mortgages, 85% of loans are for families that
  earn less than 12 MW.
                                                  Sources of Financing




                              100%
                               90%
                               80%
                                                                         Debt and Other
                               70%
                                                                         Public Debt
                               60%                                       Infonavit
                               50%                                       Sofoles
                               40%                                       Development Bank
                               30%                                       Banks
                               20%
                               10%
                                0%
                                           1994           2005
Housing Finances Systems in Emerging Economies
Session 3: The Role of the Specialized Lender
World Bank Group Conference
                                         PLANECIÓN
Mortgage Sofols profile

• Two products: mortgages
  and construction lending
  (Bridge loans).                                           Mortgages Originated by Sofols
• Two business: Origination 160,000
  and collection.             140,000
• In the last ten years:      120,000

   – Have originated over 100,000
     850,000 mortgages.        80,000

   – Financed 1.4 MM new 60,000
     homes.                    40,000

                               20,000
• Portfolio of US$12 Billion.     -
• Equity of $1.1 Billion.                            1995      1997       1999     2001   2003   2005

                                                                      Loans   Fovisste
• Focused in serving the
  affordable market(4-15 MW)
  over 50% of population.
Housing Finances Systems in Emerging Economies
Session 3: The Role of the Specialized Lender
World Bank Group Conference
                                         PLANECIÓN
Business model (Success factors)
                                                                                     6%

• Specialized in the
                                                                           6%
                                                                      4%


  origination and collection of                               12%


  mortgages and construction                                                                                      52%

  loans.
• Collection adapts to the                                             20%



  client.
                                                                 SHF                        Public Debt and securitization
     – Hand deliver statements. We                               Commercial Banks
                                                                 International FI
                                                                                            Development banks
                                                                                            Other funding
       collect door to door.                                               Total Secutization of Loans


     – When the client in problems we
       try to work out a solution.
                                                     $2,500

                                                     $2,000
• Funded though other financial                      $1,500

  institutions and public debt.                      $1,000

  Ultimate bet: Securitization.                       $500

  There are US$2.3 Billion in the                       $0
                                                         1º 03        2º 03         1º 04    2º 04       1º 05        2º 05
  market.
                                                          Bridge Loans       Mortgages (Sofol)   Mortgages (Infonavit)
Housing Finances Systems in Emerging Economies
Session 3: The Role of the Specialized Lender
World Bank Group Conference
                                         PLANECIÓN
How?

• It is clear that the growth of the Sofoles has been a success
  story.
• The Sofols are part of the Housing Finance System
  complementing the banks and Government Institutions
• The Sofoles serving a large part of the population (Middle
  market potential 40% of population).
• Two questions need to be answered:
   – How did it happen?
   – What happens next?


                     Surviving                   Growing Up   Market
                     Garage Industry                          Consolidation
                     (94-98)                     (99-02)      (03-06)


Housing Finances Systems in Emerging Economies
Session 3: The Role of the Specialized Lender
World Bank Group Conference
                                         PLANECIÓN
  1º Surviving
   • The Sofols distributed FOVI funds half of them with subsidy.
   • Showing that we were viable was the challenge.
                  Surviving                    Growing Up   Market
                  Garage Industry                           Consolidation
                  (94-98)                      (99-02)      (03-06)
                                                                            • The collection
                                                                              model was being
Market Focus Affordable (VIS)
                                                                              developed
             New Homes
                                                                            • 100% of funding
Products     A and B1
                                                                              came from
             (Up $22K)
                                                                              FOVI.
Funding      FOVI, subsidy
             Reduced

Collection       On site

Process          Simple basic
                 Systems (Excel)
Competition      None

   Housing Finances Systems in Emerging Economies
   Session 3: The Role of the Specialized Lender
   World Bank Group Conference
                                            PLANECIÓN
  2º Becoming market entities
   • Market funding, issuances and loans. Broader markets.
   • Reaching volume and independent construction funding.
                  Surviving                    Growing Up          Market
                  Garage Industry                                  Consolidation
                  (94-98)                      (99-02)             (03-06)

Market Focus                                  VIS and                              • First issuance,
                                              Lower middle (M)                       FOVI stops
Products                                      Broader coverage                       funding
                                              (Up to $70K)                           construction.
Funding                                       SHF and market                       • 84% of funding
                                              No Subsidy                             came from SHF.

Collection                                    On site and
                                              bank branches
Process                                       Cottage systems
                                              More sophisticated
Competition                                   Banks return to
                                              Market
   Housing Finances Systems in Emerging Economies
   Session 3: The Role of the Specialized Lender
   World Bank Group Conference
                                            PLANECIÓN
  3º Established players. Competition
   • Bank re-entered the market. Increased competition.
   • Banks and international players buy or invest in Sofols.
                  Surviving                    Growing Up   Market
                  Garage Industry                           Consolidation
                  (94-98)                      (99-02)      (03-06)
                                                                                  • 1º Securitization.
Market Focus                                                All range New &       • Some portfolios
                                                            Used Udis & Pesos       exceed US$1 B
Products                                                    Cofinancing           • 52% of funding
                                                            (Up $250K)              comes from SHF.
Funding                                                     SHF commercial        • The Sofol
                                                            Banks, x-border         operational model
                                                            securitization          has proved it
Collection                                                  On site and             works.
                                                            bank branches
Process                                                     Sophisticated
                                                            systems (Bank Core)
Competition                                                 Aggressive
                                                            Purchase of Sofols
   Housing Finances Systems in Emerging Economies
   Session 3: The Role of the Specialized Lender
   World Bank Group Conference
                                            PLANECIÓN
  Next Stage: Turning Point
   • The law is changing so the Sofol will disapear.
   • It will become a Multiple object financial institution or a Bank
                  Surviving                    Growing Up   Market          Bank or
                  Garage Industry                           Consolidation   Sofom
                  (94-98)                      (99-02)      (03-06)         (07-

Market Focus                                                                How not to loose
                                                                            lower income.
Products                                                                    Next home, HEL,
                                                                            Other loans, x selling
Funding                                                                     Securitization,
                                                                            Warehouse,
                                                                            Deposits (?)
Collection                                                                  Improve systems

Process                                                                     Better Information
                                                                            Reduce costs.
Competition                                                                 With banks and new
                                                                            entries (Deregulation).
   Housing Finances Systems in Emerging Economies
   Session 3: The Role of the Specialized Lender
   World Bank Group Conference
                                            PLANECIÓN
Questions to consider

• The efficiency of the secondary market model against portfolio
  based lending.
• What are the needs of the client.
   – One product vs. portfolio of products and services.
   – Deposits are a source of funds or a product.
• How to continue in the affordable housing market while our
  market coverage increases.
• Collection system (Door to door vs. Checking account debit).
• How to incorporate technology to reduce costs and broaden
  market coverage.
• What is the best figure? Bank or a Non Deposit Financial
  Institution


Housing Finances Systems in Emerging Economies
Session 3: The Role of the Specialized Lender
World Bank Group Conference
                                         PLANECIÓN
  Evolution of Mortgage Sofols
   • The Mortgage Sofoles started as “garage startups” they have
     to become world class players funded through the SMM.
                  Surviving                    Growing Up         Market               Bank or
                  Garage Industry                                 Consolidation        Sofom
                  (94-98)                      (99-02)            (03-06)              (07-

Market Focus Affordable (VIS)                 VIS and            All range New &       How not to loose
             New Homes                        Lower middle (M)   Used Udis & Pesos     lower income.
Products     A and B1                         Broader coverage   Cofinancing           Next home, HEL,
             (Up $22K)                        (Up to $70K)       (Up $250K)            Other loans, x selling
Funding      FOVI, subsidy                    SHF and market     SHF commercial        Securitization,
             Reduced                          No Subsidy         Banks, x-border       Warehouse,
                                                                 securitization        Deposits (?)
Collection       On site                      On site and        On site and           Improve systems
                                              bank branches      bank branches
Process          Simple basic                 Cottage systems    Sophisticated         Better Information
                 Systems (Excel)              More sophisticated systems (Bank Core)   Reduce costs.
Competition      None                         Banks return to    Aggressive            With banks and new
                                              Market             Purchase of Sofols    entries (Deregulation).
   Housing Finances Systems in Emerging Economies
   Session 3: The Role of the Specialized Lender
   World Bank Group Conference
                                            PLANECIÓN
Thank you

                                 Manuel Campos Spoor
                                     Vice-President
                                  Hipotecaria Su Casita
                                       Questions:
                           Email: mcampos@sucasita.com.mx
                              Phone: (52)-55-5481-8306

                                                     Or

                                    Mark Zaltzman
                              Director Corporate Finance
                          Email: mzaltzman@sucasita.com.mx
                              Phone: (52)-55-5481-8365
Housing Finances Systems in Emerging Economies
Session 3: The Role of the Specialized Lender
World Bank Group Conference
                                         PLANECIÓN

				
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posted:8/22/2011
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