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 Vallarta Living | Home & Real Estate | February 2006 
Mexican Housing Firms Woo Clients with Poor Credit
 Noel Randewich - Reuters
| | 300+ low income homes in Ixtapaluca, complex has more than 10,000! (helipilot) |
Mexico City - A housing developer and mortgage lender in Mexico, faced with heavy competition, have found a way to attract customers with poor credit histories, who they would have avoided in the past.
House builder Urbi, mortgage lender Su Casita and the Federal Mortgage Society are launching a plan to allow customers to rent homes with the option to buy them eventually - once they have shown they can meet monthly payments.
More than 20 percent of Mexicans who apply for loans from mortgage lenders like Su Casita are turned away because they have no down payment, no way of proving income or because they have a bad credit history, Su Casita chairman Jose Manuel Agudo said on Wednesday.
Rental contracts for up to five years will give people like taxi drivers and waiters time to prove they can meet regular payments and also to accrue a down payment, executives said. They added that the program was aimed at people who until now would not have qualified for loans.
Employer-funded non-profit lender Infonavit, as well as specialized lenders like Su Casita and Hipotecaria Nacional, have spearheaded a boom in mortgage lending in recent years, focusing on low-income people who buy homes for less than $40,000. Increased lending by banks has made the mortgage industry more competitive.
Under the plan announced on Wednesday, the Federal Mortgage Society, a government body charged with promoting the home lending industry and the development of a secondary mortgage market, will lend money to Su Casita.
Su Casita, partly owned by Spanish savings bank Caja Madrid, will lend the money to an investment firm, which will use it to buy houses from Urbi at inexpensive wholesale prices.
The investment firm, now the owner of hundreds of new homes, will rent them with the expectation of selling almost all of them to their occupants at more expensive retail prices within five years.
MORE DEALS SEEN
Urbi will sell about $100 million worth of new homes to the investment firm this year, with plans to expand in the future, said Urbi operations director Carlos Cota.
Su Casita's Agudo estimated the investment firm buying the homes would make a return of more than 20 percent on the transactions.
"We expect this to lead to interest from more construction companies and financial intermediaries to take advantage of this market segment," Federal Mortgage Society head Guillermo Babatz told reporters.
Big banks all but gave up lending to consumers after a 1994/95 economic crisis devastated the industry, but they too have begun to compete aggressively, focusing on middle class and wealthier clients.
Banks and specialized lenders have begun to cut interest rates and trim down payment requirements as the industry heats up. This week, HSBC launched its own no-down-payment plan for Mexican clients.
Leading home construction companies like Urbi, Homex, Ara and Geo have benefited from the boom in financing and have been favorites among stock market investors in recent years.
President Vicente Fox expects to surpass a goal to see more than 750,000 houses built and financed per year by the end of his term in 2006.
Andres Manuel Lopez Obrador, the leftist front-runner for Mexico's July presidential elections, pledged last week to see 1 million homes built and financed per year if he wins. |
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