Mr. Gonzalez is chief planning officer for Infonavit, a private-sector Mexican pension fund that is a major source of mortgage funds in the country. Following are excerpts from a speech he gave this month at the Mortgage Bankers Association's second annual seminar on international real estate finance.
Private and public-sector joint action and commitment have been and will continue to be the linchpins of effective reform (of the mortgage system) in Mexico. And we are well on our way toward creating a more level playing field.
I would like to mention some key areas and discuss the progress we have made in each:
Making securitization possible in Mexico requires reform of the civil code and procedures of each Mexican state. I am pleased to say that six states have already implemented such changes, and two more states, including Mexico City, are in the process.
Moreover, the government has presented its reform proposal to eight more states, and if they are willing - and I believe they are - this whole process could be largely accomplished by the MBA's next meeting. This means no transfer costs for securitization, and foreclosure time equivalent to the U.S. average.
Modernization of the public registry process will facilitate the handling of the increased volume created through securitization.
This is an obvious example of the need for private-sector leadership and involvement at the local level. Federal departments are eager to see this modernization occur, and they are actively supporting efforts in this direction through the development of a national model. As we speak, three states have already started this program.
In the past 18 months, we have seen a drop in the level of closingcosts. But there is a long road ahead yet.
Modernization of appraisal procedures is vital in boosting confidence, both the investor's and the homebuyer's.
We are moving toward greater uniformity of standards in this area, both in the appraisal values and in the processes to determine them. The National Banking Commission is in the process of drafting a proposal for reform. With reforms in place, any investor or rating agency will be able to obtain the data necessary to assess the real value of the collateral.
The private sector needs information about the rules for disclosure of financial information to ensure a more efficient and transparent process. The (disclosure) rules were published in the Official Gazette on Feb. 15.
A centralized credit scoring scheme is in place, and information regarding the banking system is well advanced in two credit bureaus.
Standardization of mortgage loans and of the credit underwriting process will allow more efficient securitization.
This will take a little time, as it is an evolutionary process. Nevertheless, alliances in the private sector as well as cross-company data sharing schemes are already showing progress.
Clear rules of the game are a sine qua non of securitization.
Securitization involves many players at many different levels. The rules of the game must be clear if the players are to interact effectively, and for the benefit of both investor and homebuyer.
Conduits must be established once the country's macroeconomic conditions are fully stabilized and investor confidence has returned.
The very complexity of the securitization process continues to require significant changes in the short, medium, and long term.
We are working hard and fast to make the Mexican housing environment more efficient and transparent. We are determined to mitigate the risks inherent in fragmentation, bureaucracy, and the lack of proper information.
But no, we do not pretend to eliminate all market risks. Every market has certain risks, and Mexico is no different from any other in that sense. What we are seeking to create is an environment in which market risks can be effectively assessed and priced.
