The manager of the Inter-American Development Bank Private Sector Department, Hiroshi Toyoda, the President of Brazilian Securities Companhia de Securitização, Fábio Nogueira, and the CEO of the company, Moise Politi, signed a $75 million loan for a mortgage instruments warehouse facility. The borrower will finance the origination and accumulation of mortgage instruments for home acquisition, home improvement and acquisition of office or retail space.
According to Fabio Nogueira, the "IDB transaction will enhance significantly the local capital market and the business of real estate securitization in Brazil. Brazilian Securities will use this facility to securitize large volumes of low and middle income residential mortgages. Additionally, the inclusion commercial and retail mortgages will generate new developments contributing for the country's infrastructure, as well as creating new employment, since the real estate segment is the largest employer for non-specialized workers".
The seven-year loan will provide Brazilian Securities with the required warehouse financing to enhance their ability to originate and accumulate mortgage instruments until there is sufficient volume to place mortgage-backed securities in the domestic capital markets based on its origination capabilities of the borrower and market demand. The proceeds of the mortgage-backed securities will be used to originate new Mortgage Instruments and accumulate them in the Warehouse Facility and the foregoing cycle will be repeated.
The facility consolidates and builds on the financings carried out by the Inter-American Investment Corporation (IIC) since 2000 with Brazilian Securities and its sister company, Brazilian Mortgages.
Daniela Carrera, the IDB’s Project Team Leader said: “The facility will provide Brazilian Securities the financial means to expand its participation and play a deeper role in the real estate finance market in Brazil. The development of the Brazilian mortgage market has gained momentum with the implementation of a favorable regulatory environment in a context of stronger macroeconomic fundamentals. As commercial banks and other private financial institutions seek to expand their credit and mortgage portfolios, mortgage-backed securities are expected to play an increasingly important role. Market growth should result in an increase in market liquidity, a decline in mortgage costs, increase in mortgage availability and the expansion of market supply of residential and commercial real estate.”
The facility has been structured to comprise an array of eligible mortgage instruments based on their market relevance, their inherent risks and available mitigants and the Bank’s contribution to the objectives of diversification of financing sources and consolidation of the domestic capital markets as the primary provider of funds for the mortgage market.
Hans Schulz, the Head of the Financial Markets Team of the IDB’s Private Sector Department said: “We are excited about this opportunity to support the growth of the Brazilian MBS market, which is bound to become an increasingly significant and efficient funding source for filling the country’s housing gap. The Bank is working with a growing number of market participants across the region to address their needs for funding and credit enhancement with flexible, tailor-made solutions in the MBS asset class.”
The Team was composed of: Daniela Carrera Marquis, Project Team Leader; Victor Hugo Moscoso Project Team Member (IIC), Florencia Attademo-Hirt and Rosemary Jeronimides, Attorneys; and Pablo Cardinale, Environmental Specialist.