CANCUN, Mexico — President Vicente Fox is trying to breathe life into Mexico's moribund housing industry by creating a viable mortgage market in a country where home loans are often too expensive or unavailable on any terms to potential buyers.
Loan scarcity is a big reason why Mexico's housing shortage is reaching crisis proportions. The country's housing deficit is now at more than 3 million units and growing at 300,000 per year, said panelists at the Mexican Bankers Assn. meeting here over the weekend.
Last year, Fox established the Federal Mortgage Assn., an agency resembling Fannie Mae and Freddie Mac that will seek to ensure a continuous flow of funds to lenders by repackaging mortgages into securities that are sold to institutional and other investors. Operations began this month with the goal of increasing the number and lowering the cost of home loans.
Speaking to the bankers group, Fox promised a legislative initiative to free up mortgage funds by giving lenders stronger legal recourse in collecting loan collateral. Weak collection and eviction powers are among the reasons why banks and mortgage lenders have retreated from the market since Mexico's 1995 economic crisis.
Fox's initiative will depend on cooperation from the Mexican congress, which so far has been unreceptive to Fox's reform efforts in other areas of the economy, including energy and taxes.
Fox also wants to give managers of individual retirement accounts, called afores, the right to invest in mortgages, said Manuel Zepeda, general director of the Federal Mortgage Assn.
Standardization of Mexico's appraisal industry and modernization of how property and liens are recorded also are to be included in the Fox plan, Zepeda said. Arbitrary and--by U.S. standards--incomplete recording practices also have worked to discourage many mortgage lenders here.
Although the outcome of the Fox initiative may be uncertain, economists at the bankers' association meeting emphasized that the weak housing and mortgage markets are taking a toll on Mexican society and economy.
Glaring evidence of the social costs can be seen in the shanty towns that ring most Mexican cities. To the east of the Mesa de Otay manufacturing zone in Tijuana, thousands of maquiladora workers who can't afford or find more substantial dwellings live in squalid neighborhoods with no running water, sewers or paved streets.
