Washington, D.C., August 10, 2005
– The International Finance Corporation, the private sector arm of the World Bank Group, announced an agreement to provide a credit enhancement to GMAC Financiera’s fourth mortgage-backed securities issuance in Mexico.
The credit enhancement is in unidades de inversion (UDIs) 13.5 million—Mexican pesos linked to an inflation index—$4.5 million equivalent. This is the first transaction under the $50 million equivalent credit enhancement facility that IFC signed with GMAC in May 2005 to support the firm’s mortgage-backed securities program in the country.
The enhancement announced on Wednesday helped make possible the mxAAA rating by Standard and Poor’s, AAA (mx) by Fitch, and Aaa.mx by Moody’s—all on the Mexican national scale—for a successful placement of UDIs 139.6 million ($46.5 million equivalent) of mortgage-backed securities notes.
Nina Shapiro, IFC’s vice president finance and treasurer, said, “We are pleased to enter the Mexican mortgage-backed securities market with an innovative enhancement structure and to support its development through partnerships with key players such as GMAC. We look forward to participating in this type of enhancement in Mexico and other countries in Latin America.”
José Landa, GMAC’s managing director, said, “GMAC Financiera is pleased to have developed a strong relationship with IFC and to be working together to support the development of the housing finance sector in Mexico. This investment is a vote of confidence in GMAC’s operations in Mexico, and we anticipate working with IFC on future mortgage-backed securities issuances.”
IFC’s strategy is to develop the housing sector in Mexico for mortgage and some construction finance by providing funding to key players and to contribute to the development of the country’s capital markets. Recognizing the need for long-term local currency funding for mortgage finance companies, to date IFC has committed the equivalent of $300 million in peso-denominated collateralized revolving warehouse lines and other financing to Mexican housing companies. This funding, part of the first phase of IFC‘s housing sector strategy, focuses on the development of the primary market.
The most recent investment highlights phase two of the strategy; promoting a vibrant secondary mortgage market while fostering a liquid and efficient capital market in Mexico. IFC is also exploring with others in the sector the development of a secondary mortgage market conduit (similar to Fannie Mae in the United States) to facilitate an even more vibrant secondary mortgage market. This effort, in conjunction with the important work being done by Sociedad Hipotecaria Federal, should help create a sustainable long-term mortgage market in Mexico.
Atul Mehta, director of IFC’s Latin America and Caribbean Department, said, “This transaction is a key step in the implementation of IFC’s housing finance strategy in Mexico. A functioning mortgage system will help create a more liquid housing market and enable more first-time buyers to purchase their own property, which will improve living standards.”
GMAC Financiera was established in 2000 by GMAC Residential Funding Corporation as part of its international strategy that identified Mexico as one of the key growth countries for GMAC’s housing finance business. GMAC Financiera has experienced high growth during the past four years and has successfully developed strong relationships with the mortgage
sofoles
—specialized financial intermediaries in Mexico—and other relevant industry players.
The mission of IFC (
www.ifc.org)
is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY04, IFC has committed more than $44 billion of its own funds and arranged $23 billion in syndications for 3,143 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY04 was $17.9 billion for its own account and $5.5 billion held for participants in loan syndications.
