Argentina a Hot Spot for Mortgage Securities

Argentina is becoming a spawning ground for mortgage securitization in Latin America, according to an annual report from Standard & Poor's.

The report noted a favorable legal and regulatory environment, a housing deficit in Argentina that creates the potential for new mortgage originations, and growth in interest in Latin American debt on the part of pension funds and other international investors.

During the last three years, securitization has accounted for more than $4 billion of funding for Argentine issuers and originators, the report said.

The nation's housing market has undergone numerous changes in the 1990s that have made mortgages more affordable to consumers, it noted.

The market consists of about 450,000 mortgages with an outstanding balance of almost $12 billion, it said.

The government has created a legal framework for securitization, standardized mortgage loan documentation, and underwriting and servicing procedures similar to those in the United States, the report said. Investors there are also now protected by laws similar to those that protect mortgage-backed securities investors in the United States.

Factors that could restrain secondary mortgage growth include banks that enjoy strong net revenue and excess capital reserves and do not need to push assets off their books. And the banks tend to be unwilling to share portfolio information, the report said.

A conference on Latin American real estate investment held in Miami earlier this month was the most well-attended ever, said a spokeswoman from the sponsor, the Urban Land Institute. Over 300 bankers from the United States and abroad attended, with about two-thirds of the attendees from Latin American countries.

Argentina has been, and will continue to be, one of the fastest- growing mortgage markets, speakers there said.

In fact, the country has the highest potential for mortgage-loan volume growth, according to research by Banco Central de la Republica Argentina.

Mortgage loans represent only 2.1% of the country's gross domestic product, Banco Central data show, versus 2.4% in Brazil, 6.5% in Mexico, 9.5% in Chile, and a staggering 48% in the U.S.

The developer and financer Compania de Inversiones de Bienes Raices Argentina, or Cibra, originally partnered with Chase in 1990 to finance several residential communities outside of Buenos Aires.

The area presented "a lot of opportunity" because of its proximity to the PanAmerican Highway, explained Enrique Etchebarne Bullrich, president of Cibra.

Brazil is also facing a significant shortage in mortgage financing, said Katherine G. Farley, managing director of Tishman Speyer Properties, a New York-based developer. Ms. Farley is projecting 4% to 4.5% long-term growth for the Brazilian housing market.

Brazil needs about $190 million to cope with its housing shortage, Claudio Bernardes, executive director of Ingai Incorporadora, Sao Paulo, told investors. He said his residential development company starts selling units before construction even begins.

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