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Caixa selling securities to fund Brazilian property mortgages

Date added: 23rd June, 2011 at 10:10
(view all articles from June, 2011)

State-owned bank Caixa Economica Federal is to fund lending on Brazilian property through the sale of mortgage-backed securities.

Reuters spoke to president of the institution Jorge Fontes Hereda about the plans, which it noted could also provide a good opportunity for foreign investors to buy into the country's booming real estate sector.
Caixa will sell up to $2 billion (1.2 billion) worth of mortgage-backed securities, known locally as CRIs, in the second half of 2011, Mr Hereda revealed.

The bank is targeting pension funds, institutional investors and overseas buyers in the sale, which will be the second the bank has held this year, having shifted R$300 million (£118 million) of securities in recent months.

"There's a discussion in the market," he explained. "How is this boom in Brazil going to continue? Does it have a future? Does the funding exist?
"One of the solutions we see is for this securitisation to happen and we're moving in that direction," Mr Hereda explained.

The bank intends to use the money it gains from the sale to continue increasing the amount it lends to home buyers, which is growing at an annual rate of 50 per cent.
Real estate financing by the company increased to R$12.3 billion in December 2009 from R$8.5 billion a year earlier.

Affordable housing projects may be one of the institution's focuses, as it is the main organisation involved in president Dilma Rousseff's initiative to construct at least two million more residences in the country by 2014.

She is continuing the work of her predecessor Luiz Inacio Lula da Silva, who started the Minha Casa, Minha Vida (My House, My Life) programme to help people on low incomes to purchase homes.

Reuters revealed that affordable housing projects are the main area for growth in the Brazilian property industry and Caixa's securities sale could open up more opportunities for those wishing to invest in this booming sector.

The news provider noted that the move may also be good news for homebuilders in the nation, particularly as private banks are not yet confident about long-term lending.
Indeed, outstanding mortgages in the country were worth just 3.5 per cent of Brazil's gross domestic product in 2010, compared with around 100 per cent in the US.

One of the reasons private banks are holding back is because they are worried about the possibility of hyperinflation and other financial disasters, but Mr Hereda does not believe there is any need to be so risk averse.

"We're going to continue expanding, that much is certain," he said. "The only question is how much."

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