Washington, D.C., October 9, 2008
—IFC, a member of the World Bank Group, today announced that it will launch an innovative facility designed to support Mexico’s housing finance sector and help mitigate potential liquidity shortfalls arising from the United States and global credit crises.
The $150 million Mexican Housing Finance Intervention Facility was structured in close collaboration with Sociedad Hipotecaria Federal (SHF), the Mexican government’s housing development bank, and the Inter-American Development Bank (IDB). It aims to provide a comprehensive response to recent liquidity shortfalls in Mexico’s residential mortgage-backed securities (RMBS), also called BORHIS locally. IDB is considering a similar facility, which would make available an additional $150 million. The impact of both IFC and IDB facilities would be of $300 million.
Through the facility, IFC can purchase up to 15 percent of BORHIS to offset future shortfalls in investor demand for these securities. IFC will also provide credit enhancements to BORHIS in the form of partial credit guarantees, in coordination with SHF, or by purchasing RMBS mezzanine risk tranches. Each component should stimulate private sector investor flows into the BORHIS and housing finance sectors—both of which have sound credit fundamentals and underwriting standards, in spite of global liquidity pressures.
Javier Gavito, General Director of SHF, said, “Mexico’s capital markets continue to be a viable source of funding for housing. By providing liquidity to BORHIS, IFC is helping address the shortage of adequate housing, bridging the housing gaps in our country, which is in line with our long-term strategy.”
James Scriven, IFC Director for Global Financial Markets, said, “This innovative and counter-cyclical initiative is the first of its kind for IFC—not only for housing finance, but also for any emerging markets asset class in a client country. Given the current global financial crisis, it is also likely to serve as a model for similar initiatives in other emerging markets.”
Since 2001, IFC has invested $531 million to support Mexico’s housing finance sector and help expand access to mortgages for lower- to middle-income families. As part of its strategy, IFC has collaborated with SHF to develop a vibrant primary and secondary mortgage market in the country.
IFC has collaborated on this effort with IDB, which also aims to support Mexico’s housing finance sector in response to the increasingly challenging market conditions. IDB expects to put forward its facility for board consideration next month.
About IFC
IFC, a member of the World Bank Group, creates opportunity for people to escape poverty and improve their lives. We foster sustainable economic growth in developing countries by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. Our new investments totaled $16.2 billion in fiscal 2008, a 34 percent increase over the previous year. For more information, visit
www.ifc.org.
