Early signs from the new administration in Mexico indicate that securitization legislation is a high priority and, contrary to earlier expectations, the creation of a government entity similar to Fannie Mae to help originate standardized mortgages is under serious consideration.

A financial representative from Bancomext recently told attendees at a forum held by the United States/Mexico Chamber of Commerce in New York that government officials have informally approved a similar government-sponsored entity.

Legislation to permit mortgage securitization will be passed "before Congress resumes" next year, the representative predicted, but it was still unclear whether the proposed quasi-public entity would also provide any type of guaranty on the mortgage-backed securities issued, according to people who attended the meeting.

There has been no official word from the new government on these points or regarding the creation of the housing agency, sources in Mexico said. Not surprising since Mexican President Ernesto Zedillo took office two weeks ago.

"While the major lenders such as Bancomer, Banamextand Banca Serfin have ready access to credit histories on high-income borrowers, people with lower incomes either don't have a credit history or the data is not available, but the need for housing is most acute at the low-income level," the source said.

"A government guaranty would be the logical step at the beginning," said an official at Duff & Phelps, which operates an office in Mexico City. But this is a "project in the hands of the government," he added, and no official notice has been given.

Mortgage lenders looking to take advantage of the budding market may find themselves being called upon by the Mexican banking industry. Analysts believe that Mexico plans to model its MBS market closely to the United States'. Fannie said last year that it had consultations with some Mexican interests and had offered advice, so there are signs that that is occurring.

Other positive signs are that Mexican banks are getting ahead on their homework. Banco De Mexico has been working with the World Bank on the development of MBS and Banco Mexicano, Mexico's sixth- largest bank, is discussing an alliance with First Mortgage Group, one of the U.S.'s largest mortgage servicers, to enter the country's primary and secondary mortgage market.

These alliances could become a trend and Mexican banks may begin courting mortgage lenders soon. And it makes sense for U.S. banks to listen. Although the North American Free Trade Agreement allows American banks to set up shop in Mexico, the approval process is both long and laborious.

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