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IFC INVESTS TO DEVELOP MORTGAGE FINANCING IN ARGENTINA


Jannette Esguerra
Phone: (202) 458-5204
Fax: (202) 974-4384
E-mail: jesguerra@ifc.org


WASHINGTON, D.C., JUNE 13, 2000 — The International Finance Corporation will be part of a US$1.55 billion investment to establish a secondary mortgage market in Argentina. The investment will create the Secondary Mortgage Market Company (SMMC), Argentina's first major secondary mortgage company, which will provide more affordable financing to homebuyers and further develop Argentina's financial markets.
The SMMC will organize and coalesce the primary mortgage market by instituting standards for credit and property underwriting, and by standardizing documentation and mortgage products. It will also stand ready to buy all qualifying mortgages presented to it for sale, either for its own held portfolio or for eventual securitizations, thereby bringing a higher level of liquidity into the banking system. It is expected that these activities will stimulate the Argentine mortgage market in the way that Fannie Mae and Freddie Mac do in the U.S. market.
The principal sponsor of the new company is Banco Hipotecario (BH), a formerly state-owned mortgage bank which was privatized in January 1999. IFC will invest $150 million in SMMC -- up to $50 million for up to 20 percent equity, and a commitment of $100 million in credit enhancements to help support up to $1 billion of mortgage-backed and corporate debt securities of the new company. IFC has also agreed to mobilize further financing from private banks which would be used for Banco Hipotecario to originate and warehouse mortgages for eventual sale to the SMMC.
IFC Executive Vice President Peter Woicke said that the investment was designed to allow more people to own homes through greater access to mortgages and at lower cost than before. But, he added, IFC's goal is also to help Argentina to build a more developed capital market and stronger banking sector that will encourage long-term investment through new investment products.
IFC has encouraged the development of Argentina's capital markets with investments in the banking sector, private pension funds and insurance companies.
The mission of IFC, part of the World Bank Group, is to promote private sector investment in developing countries, which will reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses.