WASHINGTON, D.C., October 23, 2000
-- The International Finance Corporation is helping Colombia to establish a secondary mortgage market, with a US$140 million financing package for the establishment of Colombian Home Mortgage Corporation (CHMC), the first domestic company to acquire and securitize residential mortgage loans.
IFC will invest up to $30 million in direct equity and up to $10 million in convertible debt instruments for up to 25 percent of the outstanding equity of the new company. In addition, IFC will make up to $100 million available as a Local Currency Enhancement Facility, which will provide indirect and partial credit support to CHMC's mortgage-backed securities issues and corporate debt.
In addition to IFC, three core sponsors Colmena, Conavi, and Davivienda -- which are leading Colombian mortgage originators -- and institutional investors related to them, will join forces to establish CHMC. CHMC's shareholder base will be construed to ensure transparency and market confidence in the project.
CHMC will acquire, invest in, and ultimately securitize high-quality residential mortgage loans, making market mechanisms more efficient and promoting economic recovery in the aftermath of the recent economic recession and mortgage-banking crisis.
By creating a sustainable, long-term mortgage financing mechanism, as well as a new class of high-quality securities for institutional investors, CHMC will make an important contribution to the development of the Colombian capital market, said Peter Woicke, Executive Vice President of IFC. CHMC will also make home ownership more affordable to Colombians, so that more people can own their own home.
The establishment of this secondary mortgage company grew from a collaborative effort of IFC and the World Bank, the Colombian government, and the private sector. IFC's involvement marks confidence in Colombia's economic recovery.
The mission of IFC, part of the World Bank Group, is to promote private sector investment in developing countries, which will reduce poverty and improve people's lives. IFC finances private sector investments in emerging markets, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses.
