Yet another big U.S. home lender is seeking to export its efficient procedures and technology-this time to South America.
Principal Financial Group has invested about $1.5 million in a Chilean home lender, Andueza y Cia, Agentes de Mutuos Hipotecarios SA, giving the Des Moines company 60% ownership.
The insurance giant will put its Principal Residential Mortgage unit in charge of the Chilean company, which will change its name to Andueza & Principal Creditos Hipotecarios SA.
"We'll be responsible for helping it to improve its functionality by transferring knowledge and technology we've developed in this country," said Paul F. Bognanno, president and chief executive of Principal Residential.
Countrywide Home Loans has undertaken a similar venture in Europe, as has HomeSide Lending in Australia.
Principal Residential was the 18th-largest servicer in the United States at yearend, collecting and processing payments on $46 billion of loans. Andueza services $30 million of loans in Chile; Principal expects that portfolio to double by next year, given the pace of originations.
The Chilean mortgage market is small-about $2 billion is originated annually, a fraction of what the U.S. market produces-and in some ways backward. Chileans distrust the mail and prefer to make their mortgage payments in person at branches. The country has nothing like the electronic systems U.S. lenders use to underwrite loans.
"The way they handle information necessary to approve applications is the way we did it decades ago," Mr. Bognanno said. "We can add value by updating servicing systems or introducing technology."
But Chile "is perceived to be, next to Argentina, the most sophisticated market in South America, arguably in Latin America," said Debra L. Erb, senior director of the Mortgage Bankers Association of America's international unit.
A key attraction: Housing transactions are denominated in development units, or UF's (the Spanish acronym), instead of the local currency. The central bank adjusts the peso value of the UF daily, depending on movements of the consumer price index in the preceding month.
That shields investors from inflation and enables lenders to make fixed- rate loans without worrying that their principal will erode.
Perhaps because of this, Chile enjoys "liquidity that doesn't exist in a lot of other markets," said Michael Marez, senior vice president for Latin America at Pulte Mortgage, a unit of home builder Pulte Corp.
Though mortgage securitization is in its infancy in Chile, many local pension funds and insurance companies buy whole loans-including Principal, which has an $80 million Chilean mortgage portfolio.