evolucion de la cartera hipotecaria su casita s.a. de c.v. the expansion and future of sofols in...

EVOLUCION DE LA CARTERA

Hipotecaria Su Casita S.A. de C.V.

The Expansion and The Expansion and Future of Sofols in Future of Sofols in

MexicoMexico

Housing Finance Systems in Emerging EconomiesHousing Finance Systems in Emerging Economies

World Bank Group ConferenceWorld Bank Group Conference

Session 3 The Role of the Specialized Housing LendersSession 3 The Role of the Specialized Housing Lenders

March 15March 15

Manuel Campos SpoorManuel Campos Spoor

Hipotecaria Su CasitaHipotecaria Su Casita

PLANECIÓN

Housing Finances Systems in Emerging EconomiesSession 3: The Role of the Specialized LenderWorld Bank Group Conference

Su Casita’s profile

• 120,000 mortgages in the 120,000 mortgages in the last 10 yearslast 10 years. Current . Current portfolio 105,000.portfolio 105,000.

• Financed the Financed the construction of 160,000 construction of 160,000 new homes.new homes.

• 22,000 new loans in 22,000 new loans in 20052005. .

• Active in Infonavit Active in Infonavit cofinancing and cofinancing and Fovissste.Fovissste.

319 783 1,038 1,480 2,244 2,2815,148

9,74812,578

14,486

18,877

23,591

928

2,015

1,534

1,169

1,128

1,104

4,686

1,165

1,16050

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

2000 2001 2002 2003 2004 2005

Millones de Pesos

Otros Activos* Portafolio dentro de balance Portfolio Prosavi Portfolio Bursatilizado

• US$3B portfolioUS$3B portfolio under administration. under administration.• Average loan US$30,000Average loan US$30,000, average income of client , average income of client

$1,000.$1,000.• Over 130 offices in Mexico and the US.Over 130 offices in Mexico and the US.• Total issuances in 2005 US$711 MMTotal issuances in 2005 US$711 MM including mortgage including mortgage

and Construction loans securitization and Cross and Construction loans securitization and Cross Border Construction loan issuance.Border Construction loan issuance.

PLANECIÓN


What is a Sofol?

• The Sofols (Sociedad Financiera de Objeto Limitado) were The Sofols (Sociedad Financiera de Objeto Limitado) were born in 1993 as a result of NAFTA, with a limited scope. born in 1993 as a result of NAFTA, with a limited scope. Next Mexico entered its’ worst economic crisis in Next Mexico entered its’ worst economic crisis in history.history.

• In the last 13 years they have been a success story In the last 13 years they have been a success story granting overgranting over 13 MM loans 13 MM loans andand represent 10% of Mexico’s represent 10% of Mexico’s financingfinancing..

• They are They are specialized financial institutionsspecialized financial institutions that grant that grant Mortgage, Consumer, Automotive, Agricultural and other Mortgage, Consumer, Automotive, Agricultural and other kind of loans (i.e. Working Capital).kind of loans (i.e. Working Capital).

• For the past three years they have For the past three years they have successfully competed successfully competed with commercial bankswith commercial banks that have returned to the market. that have returned to the market.

• The current administration has decided to The current administration has decided to deregulatederegulate the the sector and sector and eliminated the limited scope restrictioneliminated the limited scope restriction. The . The Sofols have to decide: Sofols have to decide: “What do to do when we grow up”“What do to do when we grow up”

PLANECIÓN


1994 worse than 1984

• In the NAFTA negotiation the figure was created.In the NAFTA negotiation the figure was created.• The Mexican financial system was dominated by The Mexican financial system was dominated by

commercial banks that channel 76% of all resources.commercial banks that channel 76% of all resources.• When Mortgage Sofols started operations no sources When Mortgage Sofols started operations no sources

of funds existedof funds existed ( (One time loan right auction).One time loan right auction).• In December 1994, the In December 1994, the “Tequila Crisis”“Tequila Crisis” resulted in resulted in

the biggest economic crisis in history and a the biggest economic crisis in history and a collapse of the Mexican Banking system collapse of the Mexican Banking system (Opportunity).(Opportunity).

• OpportunityOpportunity. The Sofols, which were just starting . The Sofols, which were just starting operations, were not affected by the crisis (No operations, were not affected by the crisis (No loans). In the case of the Mortgage Sofoles we loans). In the case of the Mortgage Sofoles we became the sole intermediary of FOVI (Now SHF) as became the sole intermediary of FOVI (Now SHF) as the banks closed all their mortgage programs.the banks closed all their mortgage programs.

1994 was bad for some and good for Sofols.1994 was bad for some and good for Sofols.

PLANECIÓN


Present Situation

• There are 58 Sofols There are 58 Sofols that manage a portfolio that manage a portfolio of US$20B, 2.6% of GDP.of US$20B, 2.6% of GDP.

• Mortgage loans Mortgage loans represent 63%represent 63% of of balance.balance.

• 3.2 MM loans were 3.2 MM loans were originated last year, originated last year, mostly personal and mostly personal and working capital loans.working capital loans.

• 30% of funds come from 30% of funds come from issuances in public issuances in public markets and less than markets and less than half from development half from development banks.banks. 0

5

10

15

20

1994 2005

Sofol by Specialization

Mortgage

Automotive

Consumer

Agricultural

Working capital andother

Number and Portfolio of Sofols

0

10

20

30

40

50

60

70

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Number

0

5

10

15

20

25

US Billion

Loan Balance Number

PLANECIÓN


Participation in Financial Sector

• The Sofols are a significant player in the market. The Sofols are a significant player in the market. They represent 10% of credit. They represent 10% of credit.

• They serve the middle and lower marketThey serve the middle and lower market, more than 50% , more than 50% of clients have incomes below 8 MW.of clients have incomes below 8 MW.

• In the case of mortgages, 85% of loans are for In the case of mortgages, 85% of loans are for families that earn less than 12 MW.families that earn less than 12 MW.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1994 2005

Sources of Financing

Debt and Other

Public Debt

Infonavit

Sofoles

Development Bank

Banks

PLANECIÓN


Mortgage Sofols profile

• Two products: Two products: mortgages mortgages and construction lendingand construction lending (Bridge loans).(Bridge loans).

• Two business: Origination Two business: Origination and collection.and collection.

• In the last ten years:In the last ten years:– Have Have originated over originated over 850,000 mortgages.850,000 mortgages.

– Financed 1.4 MM new Financed 1.4 MM new homes.homes.

• Portfolio of Portfolio of US$12 US$12 BillionBillion..

• Equity of $1.1 Billion.Equity of $1.1 Billion.• Focused in serving the Focused in serving the

affordable market(4-15 affordable market(4-15 MW) over 50% of MW) over 50% of population.population.

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

1995 1997 1999 2001 2003 2005

Mortgages Originated by Sofols

Loans Fovisste

PLANECIÓN


Business model (Success factors)

• Specialized in the Specialized in the origination and collectionorigination and collection of of mortgages and construction mortgages and construction loans.loans.

• Collection Collection adapts to the adapts to the clientclient..– Hand deliver statements. We Hand deliver statements. We

collect door to door.collect door to door.– When the client in problems When the client in problems

we try to work out a we try to work out a solution.solution.

• Funded though other financial Funded though other financial institutions and public debt. institutions and public debt. Ultimate bet: SecuritizationUltimate bet: Securitization.. There are US$2.3 Billion in There are US$2.3 Billion in the market.the market.

52%

20%

12%

4%

6%6%

SHF Public Debt and securitizationCommercial Banks Development banksInternational FI Other funding

$0

$500

$1,000

$1,500

$2,000

$2,500

1º 03 2º 03 1º 04 2º 04 1º 05 2º 05

Total Secutization of Loans

Bridge Loans Mortgages (Sofol) Mortgages (Infonavit)

PLANECIÓN


How?

• It is clear that the growth of the Sofoles has been It is clear that the growth of the Sofoles has been a success story. a success story.

• The Sofols are part of the Housing Finance System The Sofols are part of the Housing Finance System complementing the banks and Government Institutionscomplementing the banks and Government Institutions

• The Sofoles serving a large part of the population The Sofoles serving a large part of the population (Middle market potential 40% of population).(Middle market potential 40% of population).

• Two questions need to be answered:Two questions need to be answered:– How did it happen?How did it happen?– What happens next?What happens next?

SurvivingGarage Industry(94-98)

Growing Up (99-02)

MarketConsolidation (03-06)

PLANECIÓN


1º Surviving

• The Sofols distributed FOVI funds half of them with subsidy.The Sofols distributed FOVI funds half of them with subsidy.• Showing that we were viable was the challenge.Showing that we were viable was the challenge.


Market Focus

Products

Funding

Collection

Process

Competition

Growing Up (99-02)


Affordable (VIS)New HomesA and B1(Up $22K)FOVI, subsidyReduced

On site

Simple basicSystems (Excel)None

• The collection model was being developed

• 100% of funding came from FOVI.

PLANECIÓN


2º Becoming market entities

• Market funding, issuances and loans. Broader markets.Market funding, issuances and loans. Broader markets.• Reaching volume and independent construction funding.Reaching volume and independent construction funding.

Market Focus

Products

Funding

Collection

Process

Competition

VIS andLower middle (M)Broader coverage(Up to $70K)SHF and marketNo Subsidy

On site and bank branchesCottage systemsMore sophisticatedBanks return toMarket


Growing Up (99-02)


• First issuance, FOVI stops funding construction.

• 84% of funding came from SHF.

PLANECIÓN


3º Established players. Competition• Bank re-entered the market. Increased competition.Bank re-entered the market. Increased competition.• Banks and international players buy or invest in Sofols.Banks and international players buy or invest in Sofols.

Market Focus

Products

Funding

Collection

Process

Competition

All range New &Used Udis & PesosCofinancing(Up $250K)SHF commercialBanks, x-bordersecuritizationOn site and bank branchesSophisticatedsystems (Bank Core)AggressivePurchase of Sofols


Growing Up (99-02)

MarketConsolidation (03-06) •1º 1º

SecuritizatiSecuritization.on.

•Some Some portfolios portfolios exceed US$1 exceed US$1 BB

•52% of funding comes from SHF.•The Sofol operational model has proved it works.

PLANECIÓN


Next Stage: Turning Point

• The law is changing so the Sofol will disapear.The law is changing so the Sofol will disapear.• It will become a Multiple object financial institution or a BankIt will become a Multiple object financial institution or a Bank

Market Focus

Products

Funding

Collection

Process

Competition

How not to looselower income.Next home, HEL,Other loans, x sellingSecuritization,Warehouse,Deposits (?)Improve systems

Better InformationReduce costs.With banks and newentries (Deregulation).


Growing Up (99-02)


Bank or Sofom (07-

PLANECIÓN


Questions to consider

• The efficiency of the secondary market model against The efficiency of the secondary market model against portfolio based lending.portfolio based lending.

• What are the needs of the client.What are the needs of the client.– One product vs. portfolio of products and One product vs. portfolio of products and services.services.

– Deposits are a source of funds or a product.Deposits are a source of funds or a product.• How to continue in the affordable housing market How to continue in the affordable housing market

while our market coverage increases.while our market coverage increases.• Collection system (Door to door vs. Checking account Collection system (Door to door vs. Checking account

debit).debit).• How to incorporate technology to reduce costs and How to incorporate technology to reduce costs and

broaden market coverage.broaden market coverage.• What is the best figure? Bank or a Non Deposit What is the best figure? Bank or a Non Deposit

Financial InstitutionFinancial Institution

PLANECIÓN


Evolution of Mortgage Sofols• The Mortgage Sofoles started as “garage startups” they The Mortgage Sofoles started as “garage startups” they

have to become world class players funded through the SMM.have to become world class players funded through the SMM.

Market Focus

Products

Funding

Collection

Process

Competition

Affordable (VIS)New HomesA and B1(Up $22K)FOVI, subsidyReduced

On site

Simple basicSystems (Excel)None

VIS andLower middle (M)Broader coverage(Up to $70K)SHF and marketNo Subsidy

On site and bank branchesCottage systemsMore sophisticatedBanks return toMarket

All range New &Used Udis & PesosCofinancing(Up $250K)SHF commercialBanks, x-bordersecuritizationOn site and bank branchesSophisticatedsystems (Bank Core)AggressivePurchase of Sofols


Growing Up (99-02)


Bank or Sofom (07-

How not to looselower income.Next home, HEL,Other loans, x sellingSecuritization,Warehouse,Deposits (?)Improve systems

Better InformationReduce costs.With banks and newentries (Deregulation).

PLANECIÓN


Thank you

Manuel Campos SpoorManuel Campos Spoor

Vice-PresidentVice-President

Hipotecaria Su CasitaHipotecaria Su Casita

Questions:Questions:

Email: Email: [email protected]@sucasita.com.mx

Phone: (52)-55-5481-8306Phone: (52)-55-5481-8306

OrOr

Mark ZaltzmanMark Zaltzman

Director Corporate FinanceDirector Corporate Finance

Email: Email: [email protected]@sucasita.com.mx

Phone: (52)-55-5481-8365Phone: (52)-55-5481-8365

evolucion de la cartera hipotecaria su casita s.a. de c.v. the expansion and future of sofols in...

Documents