case studies of secondary mortgage markets: colombia housing finance in emerging markets policy and...
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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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Mortgage disbursements, Construction GDP and Total GDP: Cyclical components
-100%
-75%
-50%
-25%
0%
25%
50%
75%
100%
1977
:1
1979
:1
1981
:1
1983
:1
1985
:1
1987
:1
1989
:1
1991
:1
1993
:1
1995
:1
1997
:1
1999
:1
2001
:1
-5%-4%-3%-2%-1%0%1%2%3%4%5%
Disbursements of Mortgage Loan
Total GDP
-100%
-75%
-50%
-25%
0%
25%
50%
75%
100%
-40%
-30%
-20%
-10%
0%
10%
20%
30%Disbursements of Mortgage Loan
Construction GDP
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COLOMBIAN MORTGAGE SECTOR
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Disbursements of mortgage loans
0
50
100
150
200
250
300
350
400
450
Mar
-73
Mar
-74
Mar
-75
Mar
-76
Mar
-77
Mar
-78
Mar
-79
Mar
-80
Mar
-81
Mar
-82
Mar
-83
Mar
-84
Mar
-85
Mar
-86
Mar
-87
Mar
-88
Mar
-89
Mar
-90
Mar
-91
Mar
-92
Mar
-93
Mar
-94
Mar
-95
Mar
-96
Mar
-97
Mar
-98
Mar
-99
Mar
-00
Mar
-01
Bil
lio
ns
of
1998
pes
os
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Outstanding Mortgage Loans as % of GDP and of Total Credit
2%
4%
6%
8%
10%
12%
14%
16%
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
10%
12%
14%
16%
18%
20%
22%
24%
26%
28%
30%
% of GDP % of Total credit
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COLOMBIAN MORTGAGE SECTORMortgage Banks
48%
12%
59%
35%
53%
43%
57%
100
200
300
400
500
600
700
800
900
AV VILLAS BANCAFE COLMENA COLPATRIA CONAVI DAVIVIENDA GRANAH
US
$ M
Mortgage Loans % Total assets
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Mortgage BanksComposition of Assets
0%
20%
40%
60%
80%
100%
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Ag-
02
Mortgage Loans Other Loans Portfolio Investments Other assets
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0%
20%
40%
60%
80%
100%
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Ag
-02
Indexed Liabilities Peso liabilities Other liabilities
Mortgage BanksComposition of Liabilities
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0%
20%
40%
60%
80%
100%19
85
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Savings and current account Less than one year More than one year
Mortgage BanksComposition of Deposits
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UPAC, UVR and CPI: Monthly percent changes
-1%
0%
1%
2%
3%
4%
5%
6%
7%
Oct
-72
Oct
-73
Oct
-74
Oct
-75
Oct
-76
Oct
-77
Oct
-78
Oct
-79
Oct
-80
Oct
-81
Oct
-82
Oct
-83
Oct
-84
Oct
-85
Oct
-86
Oct
-87
Oct
-88
Oct
-89
Oct
-90
Oct
-91
Oct
-92
Oct
-93
Oct
-94
Oct
-95
Oct
-96
Oct
-97
Oct
-98
Oct
-99
Oct
-00
Oct
-01
% UPAC - UVR% CPI
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Non performing mortgage loans(as % of total mortgage loans)
0
5
10
15
20
25D
ic-9
4
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
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Housing Price IndexDeflated by CPI
60
70
80
90
100
110
120
130
140n
ov-8
6
nov
-87
nov
-88
nov
-89
nov
-90
nov
-91
nov
-92
nov
-93
nov
-94
nov
-95
nov
-96
nov
-97
nov
-98
nov
-99
nov
-00
nov
-01
nov
-02
Ap
ril 1
998=
100
IPV DNP BOGOTA IPV DNP MEDELLIN IPV DANE IPV Camacol
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Unemployment Rate in the 90´s
5
7
9
11
13
15
17
19
21M
ar-9
0
Mar
-91
Mar
-92
Mar
-93
Mar
-94
Mar
-95
Mar
-96
Mar
-97
Mar
-98
Mar
-99
Mar
-00
Mar
-01
Mar
-02
%
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SECURITIZATION IN COLOMBIA
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Rates
Credit Volume
Housing Demand
Construction Sector
GDP Employment
↑
↑
↑
↑ ↑
Advantages of Securitization
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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.
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Pension Funds Value as Percentage of GDP
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Pension Funds (mandatory)
Voluntary Pension Funds
Severance Funds
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TITULARIZADORA COLOMBIANA
2 Issues US$ Millions
May 2002 215
November 2002 220
Total 435
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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 mortgageloan
T.C
Titularizadora Colombiana in the Mortgage Sector
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STRUCTURE OF MBS ISSUED
A
B
C
95%
1%
4%
AAA
A
Unrated
Series Rating
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Structure of MBSStructure of MBS
Quarters
0
10.000.000
20.000.000
30.000.000
40.000.000
50.000.000
60.000.000
70.000.000
80.000.000
90.000.000
100.000.000
110.000.000
120.000.000
130.000.000
140.000.000
150.000.000
160.000.000
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58
UV
R´s
Reserve Fund
Subordinated B bond
15 yr A bond
10 yr A Bond
5 yr A bond
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MBS Coupon Rate 7.50%
Expenses: 3.65%
Excess Interest: 0.77%
Ave
rage
inte
rest
rat
e on
sec
uriti
zed
loan
s 1
2.28
%
12.28%
Interest rates and expensesInterest rates and expensesInterest rates and expensesInterest rates and expenses
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12.28%
Market Rate 5%
Market Premium: 2.38%
MBS Coupon Rate 7.50%
Expenses 3.65%
Excess Interest: 0.77%
Interest rates and expensesInterest rates and expensesInterest rates and expensesInterest rates and expensesA
vera
ge in
tere
st r
ate
on s
ecur
itize
d lo
ans
12.
28%
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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%
5 10 15Maturity
TIPS E-1 TIPS E-2
TES UVR’ SPREAD OVER TIPS
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Investors’ share
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
Ba
nks
Tru
ste
e/
Sto
ck e
xch
an
ge
ag
en
t
Pe
nsi
on
Fu
nd
s
Re
al S
ect
or
Insu
rers
Co
mm
on
Fu
nd
s
Ind
ivid
ua
ls
Va
lue
F
un
ds
Inve
stm
en
t F
un
ds
com
pa
nie
sC
ap
italiz
atio
n
Tips E-1 Tips E-2
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Business PlanBusiness Plan
Mortgage Sector (US$ M) 2002 2003 2004 2005 2006 2007
Mortgage outstanding balance 4.346 4.066 4.048 4.165 4.376 4.637
New Loans 388 468 578 700 803 922
Titularizadora Colombiana 2002 2003 2004 2005 2006 2007
MBS Issuance 435 370 446 517 583 645
Mortgage balance 387 679 1.017 1.282 1.565 1.728
T.C mortgage market share 9% 17% 25% 31% 36% 37%
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• 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