Mexico City - Mexico's largest banking concern Grupo Financiero BBVA Bancomer SA sees its fledgling cross-border mortgage business growing this year and in 2010 as Americans continue to buy second homes in Mexico despite a weak U.S. economy.
"At least for us, cross-border mortgages have grown," said Isidoro Sanchez, director of business development at BBVA Bancomer's mortgage arm.
"We will be closing 2009 with around $150 million in cross-border loans," he added.
Spain's Banco Bilbao Vizcaya Argentaria SA (BBV), which controls BBVA Bancomer, lent about $100 million under its "Your Dream Home In Mexico" mortgage program last year, up from $65 million in 2007.
The dollar-denominated loans for U.S. and Canadian citizens are held on the balance sheet of the Spanish bank's U.S. subsidiary BBVA Compass Bank, while BBVA Bancomer provides the bank trust required for home purchases in Mexico along land borders and the coast.
While the minimum loan under the program is $100,000, the average so far has been about half a million dollars, Sanchez said.
BBVA's cross-border mortgage business stands to benefit from the restrictions U.S. banks have slapped on home equity loans in the wake of the housing bubble. Americans traditionally used those loans to fund home purchases in Mexico.
"We think the market is very big and we are betting on growth," Sanchez said in reference to 2010.
BBVA and rivals like Mexico's No.3 bank Grupo Financiero Banorte SAB (GFNORTE.MX) in the last three years have started to offer mortgages aimed at U.S. citizens, Canadians and Europeans who want to buy second homes in Mexico for vacations, or as an eventual retirement destination.
Some of the estimated 78 million baby boomers who will begin retiring in the U.S. over the next decade are expected to spend at least part of their retirement in Mexico, where property prices and the cost of living are lower than in the U.S.
Even so, to date about 95% of "Your Dream Home In Mexico" loans have gone to professionally active and semi-retired borrowers under 63 years of age, Sanchez said.
While lenders like BBVA see an opportunity to fill the void left by scarce home equity financing, the near-term outlook for builders is less certain.
Mexico City-based real-estate research firm Softec Consultoria Inmobiliaria said in a presentation this week that vacation home sales will likely fall to $2 billion this year from a peak of $6.4 billion in 2007, and slowly recover to around $4 billion in 2015.
Softec attributed the drop in home sales this year to the influenza epidemic in April and May, the lack of air links, and shortcomings in marketing and financing options.
Mexican home-building giant Desarrolladora Homex SAB (HXM, HOMEX.MX) opened a tourist division in early 2008 to serve foreign buyers. However, the U.S. recession and global financial crisis forced the company to scale back and postpone the construction of its tourist developments.
Homex recently finished construction of 220 units at San Jose del Cabo, and in the near-term plans to break ground on a projects of similar size in Cancun and Puerto Vallarta, Chief Executive Gerardo de Nicolas said in an interview.
The company's coastal developments are aimed at affluent buyers aged 45 to 65, with homes at San Jose del Cabo selling for $450,000 to $1 million. De Nicolas said Homex will eventually expand its offering to include homes under $300,000 for middle-class foreign retirees.
The executive doesn't see the recent crisis derailing his bet that the tourist division will eventually become an important contributor to the company's overall business in the future.
"Its a strategic initiative that we are sure will continue growing. Americans are going to continue to come to Mexico to live," De Nicolas said.
BBVA Bancomer, through its Preferred Customers' Unit, is the first bank in Mexico to cater to the special needs of foreign residents and visitors, using not only the English language, but also the same financial language you are accustomed to back home. To learn more about the BBVA Bancomer Preferred Customers Unit, click HERE or visit TerraBancomer.com.