| February
21, 2004
The Mexican
National Home Mortgage Market
By Richard
Baldwin/HispanicVista.com
While the government pays lip service
from time to time regarding Mexico's lack
of a strong national market, this article
will look at one of the strongest engines
of any national market: the home market.
First, and probably
the most important, is the ability of
future homeowners to finance the most
important purchase they will probably
make in their lives. Of course, the
purchase of a home is only the start of
things. With a home purchase come such
things as appliances, accessories,
furniture and so on. This is why the home
market is so closely watched in the US as
a powerful leading financial indicator.
And it creates jobs! You can't
underestimate the effect of this market
on the national economy and its effect on
so many sectors of the national market.
In México, the
government has initiated a home purchase
plan called Infonavit, something like a
Mexican FHA plan. The FHA was and is one
of the most important pillars of the US
home market. But in México, there is no
real mortgage market and the banks are
the lenders of most such financing.
But, remember that
the Mexican banks, due to the "Great
Mexican Bank Bail Out" discussed in
earlier articles, make a great portion
(if not most) of their income on the
government ( taxpayer subsidized) taking
over their bad loans and still are paying
the banks interest on these phony assets.
Recently, this administration investment
in the banking industry was put at $100
billion dollars . . . and this is
growing over the years with accumulating
interest. So with this nice steady
income, why would banks want to get into
things like home financing?
Now, to the defense
of the banks, another thing that drives
the risk factor up is the creaking legal
system that makes foreclosure very, very
iffy. And to compound this is the
extremely uneven system of registration
of property. In fact, wars in the rural
areas over land ownership are common
because of the lack of a good
registration system or the laws to
enforce it. The mayor of México City was
recently involved with a land dispute
right in the city.
But let’s look
at the numbers. The following figures are
not government figures, but those of the
banks themselves.
With a down payment
of between 10 to 30 percent the Infonavit
interest rates are from 14 to 15.5
percent. From sources outside Infonavit
with a down payment between 20 to 40
percent the rates are from 14 to 15.5
percent – yes, you are reading
correctly.
Variable rates (not
under Infonavit) are pegged at +6 points
of percentage over the base interest
rate. They also "guarantee"
that it will not top 20 percent in any
event. But to the many Mexicans who saw
interest rates top 50 percent in 1995,
there is a certain amount of disbelief
here.
In addition, the
above is for mortgages of up to 250,000
pesos (around $23,000 USD). Also we note
that housing costs here, in the large
cities is not so far different from what
you find in the US when considering
almost equal housing. In fact, our home
here was an almost even trade from the
sale of our home in the Chicago area, but
with less land.
But that's not quite
all. When you figure the Total Annual
Cost (CAT), we see a lot of interest
rates for the enganche (the
"hook" or down payment) going
up to 40 percent! But, at least,
individuals are allowed to deduct the
interest paid from income for tax
purposes. Big deal!
To apply and
actually get a home mortgage takes about
2 months (no this isn't E-loan) if you
are among the chosen few. I know good
employable people who have been waiting
years to realize the dream of home
ownership here. The government tells us
that the time will be reduced shortly to
about one month. To which many say
"Show me".
It should also be
pointed out that the banking system is
now almost entirely owned by foreign
interests from the US, Canada and Spain.
Some complain that México is loosing its
sovereignty. Well, let me point out that
the alternative is grim. Would we rather
have the idiots running the banks back in
1995 still at the financial helm now?
Besides, we gave up our financial
sovereignty a long time ago when we
slavishly adopted the "Washington
Consensus" for our national monetary
policy.
Again, if México
wants to become financially independent
and become more than a "client"
country, a strong national market is the
key. And the housing market is critical
to this end.
And compare the
Mexicans here to the Mexicans in the US.
One of the first things that they do,
once they get established, is to purchase
a home.
And we wonder
why they go?
______________________________________________
Richard N.
Baldwin T., a HispanicVista.com (www.hispanicvista.com)
contributing columnist, lives in Tlalnepantla,
Edo de México E-mail at: R1041643422@aol.com
|
