Banks re-enter mortgage market with huge publicity campaign

Mexican banks plan to launch a major publicity campaign in September as part of their re-entry in the residential mortgage loan market, Mexico's banking association ABM chairman Manuel Medina Mora said at a press conference earlier this week. "It will be a complete communication campaign that all of the banks that are part of the association (will launch) on radio, television and press to fomenter mortgage loans. This is a good moment to take out a home loan. For the first time in more than 30 years fixed rates for up to 15 years will be offered," Medina said. Banks have stayed on the sidelines of the mortgage industry since the 1995 Tequila crisis, with government agencies and special purpose finance companies, the Sofoles, stepping in to fill the vacuum. "It took years after the 1994-95 crisis for financial intermediaries to start offering (loans) again and it took time for families to return to a lending cycle that was completely broken," Medina said. Sofoles ended 2002 with consolidated home loans of 61bn pesos (US$5.61bn today), a 188% increase compared to 2000. While the consolidated home loan portfolio of commercial banks is more than double that of the Sofoles, banks have registered little growth in this segment over the last four years. The mortgage loan business represents an interesting prospect for banks given the fact that Mexico faces a chronic housing deficit that federal housing agency Conafovi puts at 1.81 million new units and 2.48 million houses in need of refurbishment. Commercial banks seem to be warming to mortgage loans again, reporting consolidated performing home loans of 49.9bn pesos at the end of July, a 2.9% increase from the same period last year. The administration of President Vicente Fox wants to see the public and private sectors financing 750,000 home purchases a year by 2006, almost double the number of homes bought at the start of his six-year term. Public entities including federal mortgage bank Sociedad Hipotecaria Federal (SHF), home loan agency Infonavit, and public employees home loan agency FOVISSSTE provide about 90% of mortgage loans in Mexico. SHF channels most of its home loans through the Sofoles. The government expects public and private sector entities to issue loans and subsidies for the purchase of about 530,000 homes this year, up 34.2% from the 394,867 homes purchased last year. The bulk of the financing will come from home loan agency Infonavit (300,000 homes), SHF (51,320), and civil servant social security agency ISSSTE (92,000).