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Development Bank to Guarantee More Mexico Mortgage Loans for Homebuilders

30 June, 2013

The Wall Street Journal reports that Mexico mortgage development bank Sociedad Hiptotecaria Federal will offer up to $1.18 billion in construction loan guarantees throughout 2013,amounting to more than twice the amount that was offered by the bank in 2012.

“Home construction stocks were the top gainers on the Mexican stock exchange Wednesday,” writes the Wall Street Journal.

According to Jesus Alberto Cano,head of Sociedad Hiptotecaria Federal,the increase in guaranteed money for loans is intended as a move that will encourage more private sector banks to extend loans to homebuilders investing in Mexico real estate. Cano went on to call Mexico’s homebuilding sector a “priority for the government,” citing the fact that it supplies a significant number of jobs for Mexican workers and is a vital part of the nation’s future. In addition,Cano said the applications for mortgage loans in Mexico remain high,which shows a “sustained demand for new homes.”

Sociedad Hiptotecaria Federal will reportedly now provide up to 30 percent of the loans per project,compared to just six percent prior to this announcement. This will allow construction companies with healthy balance sheets and viable projects in the pipeline to qualify for additional loan money.

“By raising the guarantees,the Mexican government hopes to lower the level of reserves that commercial banks are required to hold,” writes the Wall Street Journal. “Thus freeing capital that commercial banks can lend to the homebuilding sector.”

According to Bloomberg a variety of Mexican banks are now “flush with cash” and actively seeking out ways to cash in on the nation’s “surging mortgage market.” In fact,home loans increased by more than 10 percent between September 2011 and September of 2012,a trend that shows no signs of slowing down in 2013 and beyond.