Mexico Financial Sector Assessment Program : Housing Finance
Housing needs are high in Mexico despite quantitative progress in the last 10 years.Global data hide mismatches between housing demand and supply. First, urban growth relied for a long time on a pattern of urban sprawl, with mass-scale developments...
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World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/373741507895304592/Mexico-Financial-sector-assessment-program-technical-note-housing-finance http://hdl.handle.net/10986/28604 |
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okr-10986-286042021-05-25T09:04:54Z Mexico Financial Sector Assessment Program : Housing Finance World Bank Group International Finance Corporation HOUSING FINANCE CREDIT RISK MANAGEMENT MARKET DEPTH LENDING PRODUCTS REGULATION BANKING REFORM Housing needs are high in Mexico despite quantitative progress in the last 10 years.Global data hide mismatches between housing demand and supply. First, urban growth relied for a long time on a pattern of urban sprawl, with mass-scale developments of individual units were built outside cities where land is affordable, but far from jobs and services and with related high transportation cost.Second, the housing shortage affects some household categories more than others.The housing finance system has been contributing to these mismatches.The way the two housing provident funds that dominate the mortgage market used to function was an inducement to the urban sprawl pattern. On the supply side, they were acting as demand aggregators for developers, warrantying that projects would meet the effective demand of purchasers qualified to borrow mortgage loans, and would thus avoid market risk largely irrespective of the location of the projects. On the demand side, households were incentivized to take out loans at below market conditions to which they were entitled once in their lifetime.The new policy was outlined in February 2013, and two national 2014-2018 Programs for Urban development and Housing were approved in 2014.Housing finance has a critical role to play to support a more balanced urban development and to help improve living conditions.The growth of the market size despite the stability of the number of loans suggests that better, higher priced housing has become affordable to more households.The improvement of lending conditions also increased the affordability of finance.The macro-economic context allowed the desindexation of housing finance, a major change relatively to the 20-year period delimited by two financial crises. The mortgage Sofoles /Sofomes sector largely disappeared following the 2008-2009 financial crisis.An amendment to the General Law of Credit and Auxiliary Organizations and Activities removed the category of Sofol.SHF reoriented its activities following the demise of the Sofoles/Sofomes, without a totally clear systemic justification in some cases.On the primary market, since the disappearance of most of the sector, SHF only refinanced new mortgages for only MXN 5.3 billion in 2015 (out of about MXN 300 billion total originations).This growth has been partially driven by changes in the market structure. Two factors have played a special role in this growth: (i) the demise of Sofoles/Sofomes, since several of them were bought by banks and are now consolidated with them; (ii) the success of the lending in partnership with the Institutes. In addition, several new comers entered the mortgage market in the last 10 years, including Inmobiliaro Mexicano or ABC Capital. Still, the overall market development is largely due to the growth strategy of three lenders. These entities face several obstacles: (i) gaps that still exist in the property rights (persisting ejido land tenure for instance) and registration systems in the geographic areas – small cities, rural areas- where these institutions are active, which prevent them from securing loans as would be required by long term credit; (ii) regulatory maturity restrictions: up to 5 and 8 years for SOCAPS and Sofipos of categories I and II respectively. These limits are however lifted if housing loans are funded by SHF, the case for only a minority of institutions; (iv) insufficient operational capacities to lend medium or long term loans for housing; and (v) long term funding. 2017-10-30T16:18:56Z 2017-10-30T16:18:56Z 2016-07 Report http://documents.worldbank.org/curated/en/373741507895304592/Mexico-Financial-sector-assessment-program-technical-note-housing-finance http://hdl.handle.net/10986/28604 English CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Economic & Sector Work :: Financial Sector Assessment Program Economic & Sector Work Latin America & Caribbean Mexico |
| repository_type |
Digital Repository |
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Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
HOUSING FINANCE CREDIT RISK MANAGEMENT MARKET DEPTH LENDING PRODUCTS REGULATION BANKING REFORM |
| spellingShingle |
HOUSING FINANCE CREDIT RISK MANAGEMENT MARKET DEPTH LENDING PRODUCTS REGULATION BANKING REFORM World Bank Group International Finance Corporation Mexico Financial Sector Assessment Program : Housing Finance |
| geographic_facet |
Latin America & Caribbean Mexico |
| format |
Report |
| author |
World Bank Group International Finance Corporation |
| author_facet |
World Bank Group International Finance Corporation |
| author_sort |
World Bank Group |
| title |
Mexico Financial Sector Assessment Program : Housing Finance |
| title_short |
Mexico Financial Sector Assessment Program : Housing Finance |
| title_full |
Mexico Financial Sector Assessment Program : Housing Finance |
| title_fullStr |
Mexico Financial Sector Assessment Program : Housing Finance |
| title_full_unstemmed |
Mexico Financial Sector Assessment Program : Housing Finance |
| title_sort |
mexico financial sector assessment program : housing finance |
| publisher |
World Bank, Washington, DC |
| publishDate |
2017 |
| url |
http://documents.worldbank.org/curated/en/373741507895304592/Mexico-Financial-sector-assessment-program-technical-note-housing-finance http://hdl.handle.net/10986/28604 |
| _version_ |
1764467261716824064 |
| description |
Housing needs are high in Mexico despite
quantitative progress in the last 10 years.Global data hide
mismatches between housing demand and supply. First, urban
growth relied for a long time on a pattern of urban sprawl,
with mass-scale developments of individual units were built
outside cities where land is affordable, but far from jobs
and services and with related high transportation
cost.Second, the housing shortage affects some household
categories more than others.The housing finance system has
been contributing to these mismatches.The way the two
housing provident funds that dominate the mortgage market
used to function was an inducement to the urban sprawl
pattern. On the supply side, they were acting as demand
aggregators for developers, warrantying that projects would
meet the effective demand of purchasers qualified to borrow
mortgage loans, and would thus avoid market risk largely
irrespective of the location of the projects. On the demand
side, households were incentivized to take out loans at
below market conditions to which they were entitled once in
their lifetime.The new policy was outlined in February 2013,
and two national 2014-2018 Programs for Urban development
and Housing were approved in 2014.Housing finance has a
critical role to play to support a more balanced urban
development and to help improve living conditions.The growth
of the market size despite the stability of the number of
loans suggests that better, higher priced housing has become
affordable to more households.The improvement of lending
conditions also increased the affordability of finance.The
macro-economic context allowed the desindexation of housing
finance, a major change relatively to the 20-year period
delimited by two financial crises. The mortgage Sofoles
/Sofomes sector largely disappeared following the 2008-2009
financial crisis.An amendment to the General Law of Credit
and Auxiliary Organizations and Activities removed the
category of Sofol.SHF reoriented its activities following
the demise of the Sofoles/Sofomes, without a totally clear
systemic justification in some cases.On the primary market,
since the disappearance of most of the sector, SHF only
refinanced new mortgages for only MXN 5.3 billion in 2015
(out of about MXN 300 billion total originations).This
growth has been partially driven by changes in the market
structure. Two factors have played a special role in this
growth: (i) the demise of Sofoles/Sofomes, since several of
them were bought by banks and are now consolidated with
them; (ii) the success of the lending in partnership with
the Institutes. In addition, several new comers entered the
mortgage market in the last 10 years, including Inmobiliaro
Mexicano or ABC Capital. Still, the overall market
development is largely due to the growth strategy of three
lenders. These entities face several obstacles: (i) gaps
that still exist in the property rights (persisting ejido
land tenure for instance) and registration systems in the
geographic areas – small cities, rural areas- where these
institutions are active, which prevent them from securing
loans as would be required by long term credit; (ii)
regulatory maturity restrictions: up to 5 and 8 years for
SOCAPS and Sofipos of categories I and II respectively.
These limits are however lifted if housing loans are funded
by SHF, the case for only a minority of institutions; (iv)
insufficient operational capacities to lend medium or long
term loans for housing; and (v) long term funding. |