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

2. Mortgage disbursements, Construction GDP and Total GDP: Cyclical components

3. COLOMBIAN MORTGAGE SECTOR

4. Disbursements of mortgage loans Billions of 1998 pesos

5. Outstanding Mortgage Loans as % of GDP and of Total Credit

6. COLOMBIAN MORTGAGE SECTOR Mortgage Banks 48% 12% 59% 35% 53% 43% 57% 100 200 300 400 500 600 700 800 900 AV VILLASBANCAFECOLMENACOLPATRIACONAVIDAVIVIENDAGRANAH US$ M Mortgage Loans% Total assets

7. Mortgage Banks Composition of Assets

8. Mortgage Banks Composition of Liabilities

9. 0% 20% 40% 60% 80% 100% 1985198619871988 1989 1990199119921993199419951996 1997 19981999 2000 20012002 Savings and current accountLess than one yearMore than one year Mortgage Banks Composition of Deposits

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

11. Non performing mortgage loans (as % of total mortgage loans) 0 5 10 15 20 25 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

12. Housing Price Index Deflated by CPI

13. Unemployment Rate in the 90´s

14. SECURITIZATION IN COLOMBIA

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

16. 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.

17. Pension Funds Value as Percentage of GDP 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 1995199619971998199920002001200220032004200520062007 Pension Funds (mandatory) Voluntary Pension Funds Severance Funds

18. TITULARIZADORA COLOMBIANA 2 Issues US$ Millions May 2002 215 November 2002 220 Total 435

19. 0% 2% 4% 6% 8% 10% 12% 14% % Total loans % of performing loans 9% 12% 435 Titularizadora Colombiana 4.500 0 500 1.000 1.500 2.000 2.500 3.000 3.500 4.000 4.500 US$ M Total mortgage loan T.C Titularizadora Colombiana in the Mortgage Sector

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

21. Structure of MBS

22. 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

23. 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%

24. 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% 51015 Maturity TIPS E-1TIPS E-2 TES UVR’ SPREAD OVER TIPS

25. Investors’ share

26. Business Plan Mortgage Sector (US$ M) 200220032004200520062007 Mortgage outstanding balance 4.3464.0664.0484.1654.3764.637 New Loans 388468578700803922 Titularizadora Colombiana 200220032004200520062007 MBS Issuance 435370446517583645 Mortgage balance 3876791.0171.2821.5651.728 T.C mortgage market share 9%17%25%31%36%37%

27. 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