Case Studies of Secondary Mortgage Markets: Colombia Housing Finance in Emerging Markets Policy and Regulatory Issues Washington, DC · March 10-13, 2003.

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Presentation transcript:

Case Studies of Secondary Mortgage Markets: Colombia Housing Finance in Emerging Markets Policy and Regulatory Issues Washington, DC · March 10-13, 2003

Mortgage disbursements, Construction GDP and Total GDP: Cyclical components

COLOMBIAN MORTGAGE SECTOR

Disbursements of mortgage loans Billions of 1998 pesos

Outstanding Mortgage Loans as % of GDP and of Total Credit

COLOMBIAN MORTGAGE SECTOR Mortgage Banks 48% 12% 59% 35% 53% 43% 57% AV VILLASBANCAFECOLMENACOLPATRIACONAVIDAVIVIENDAGRANAH US$ M Mortgage Loans% Total assets

Mortgage Banks Composition of Assets

Mortgage Banks Composition of Liabilities

0% 20% 40% 60% 80% 100% Savings and current accountLess than one yearMore than one year Mortgage Banks Composition of Deposits

UPAC, UVR and CPI: Monthly percent changes Oct-96 Oct-97 Oct-98Oct-99Oct-00Oct-01 % UPAC - UVR% CPI

Non performing mortgage loans (as % of total mortgage loans) Dic-94 Jun-95 Dic-95 Jun-96 Dic-96 Jun-97 Dic-97 Jun-98 Dic-98 Jun-99 Dic-99 Jun-00 Dic-00 Jun-01 Dic-01 Jun-02 % Debt restructuring

Housing Price Index Deflated by CPI

Unemployment Rate in the 90´s

SECURITIZATION IN COLOMBIA

Rates Credit Volume Housing Demand Construction Sector GDP Employment ↑ ↑ ↑ ↑ ↑ Advantages of Securitization

Law 546 of 1999 Created securitization companies as part of a specialized housing finance system. Regulation of securitization process. Tax benefit for security's yield (tax free). Special government guarantee.

Pension Funds Value as Percentage of GDP 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% Pension Funds (mandatory) Voluntary Pension Funds Severance Funds

TITULARIZADORA COLOMBIANA 2 Issues US$ Millions May November Total 435

0% 2% 4% 6% 8% 10% 12% 14% % Total loans % of performing loans 9% 12% 435 Titularizadora Colombiana US$ M Total mortgage loan T.C Titularizadora Colombiana in the Mortgage Sector

STRUCTURE OF MBS ISSUED A B C 95% 1% 4% AAA A Unrated SeriesRating

Structure of MBS

MBS Coupon Rate 7.50% Expenses: 3.65% Excess Interest: 0.77% Average interest rate on securitized loans 12.28% 12.28% Interest rates and expenses

12.28% Market Rate 5% Market Premium: 2.38% MBS Coupon Rate 7.50% Expenses 3.65% Excess Interest: 0.77% Interest rates and expenses Average interest rate on securitized loans 12.28%

2.90% 2.40% 2.20% 2.57% 1.94% 0.91% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% Maturity TIPS E-1TIPS E-2 TES UVR’ SPREAD OVER TIPS

Investors’ share

Business Plan Mortgage Sector (US$ M) Mortgage outstanding balance New Loans Titularizadora Colombiana MBS Issuance Mortgage balance T.C mortgage market share 9%17%25%31%36%37%

Increased banks’ profitability. Availability of funds for origination of new loans. Affordability of housing loans. Development of the capital market. Diversification of investment portfolio. Minimal government intervention. Benefits of securitization in the Colombian context