Mexican Immigrants' Dollars Finance a Nascent Mortgage Market

MEXICO (By Angel Gonzalez, Knight Ridder) Monday, November 29, 2004 - Elizabeth Barriga will pay $50,000 for the house of her dreams. The only hitch: The three-bedroom property is not in Arlington, Texas, where she lives, but in her hometown of Zamora in the Mexican state of Michoacan.

"Here you will never buy a three-bedroom house for $50,000," said Barriga, 31, who will travel to Mexico to close the deal on Dec. 1. "And there, not everybody can buy a house like that."

Barriga, a cashier at a gas station who makes $15,000 a year, had no trouble finding a mortgage company to lend her the money. She provided pay stubs, a letter from her employer, copies of her tax returns and a Mexican ID.

The lender is Hipotecaria Nacional, one of several Mexican mortgage firms that have followed millions of workers across the border.

Hipotecaria Nacional, Mexico's largest mortgage lender, opened offices in New York and San Diego this year. The company was recently acquired by Banco Bilbao-Vizcaya Argentaria.

Hipotecaria Su Casita set up a shop in Denver in September 2004 and works closely with Denver-based Pulte Homes. A Houston company, Conficasa, works with Credito Inmobiliario in Mexico to provide loans.

Industry officials say immigrants' dollars might help finance the flourishing Mexican mortgage market _ and provide them with a place back home. It is also a new way for Mexico to funnel part of the $13 billion yearly flow of remittances into tangible investments.

"In our country, we don't have the same salaries that exist in the United States, where most people make at least $1,200 a month," said Jose Antonio Santoyo, director of Hipotecaria Nacional's Chula Vista, Calif., office. "Any Mexican who works here and can prove his level of income qualifies to buy a home in Mexico."

People can qualify for mortgages regardless of their immigration status, Santoyo said. Deportation is always a risk, but cases are rare.

"But if that ever happens, the people who have been working here are better prepared to find a good job in Mexico," Santoyo said.

The loan is made in Mexican pesos, on terms ranging from five to 25 years and in amounts ranging from 160,000 pesos ($15,000) to 1.6 million pesos ($150,000). Down payments are usually 10 percent to 20 percent of the total price of the home, and the interest rate averages 14 percent.

These mortgage brokers cater to 7 million Mexicans in the United States with strong ties to their homeland, said Felipe Korzenny, director of the Center for the Study of Hispanic Marketing Communication at Florida State University. But whether many will flock to get a mortgage is doubtful because most are not used to loans, he said.

"They buy patches of land in their villages and send money to their uncles or cousins, so they build a house there for less than $10,000," Korzenny said. "The reason they came here is to make more money, not to incur debt."

So far, Hipotecaria Nacional has extended 40 loans and is processing an additional 85. Hipotecaria Su Casita has processed 150 applications for loans averaging $40,000.

In the Dallas-Fort Worth area, Su Casita is processing 10 applications, said Selene Moreno, general manager at the company's Denver office.

Persuading clients to sign on has been difficult because many Latinos are wary of fraud.

"There's a certain amount of fear, because some have been abused by lenders ... so people have some reservations," said Francisco Cardiel, a Dallas representative for Su Casita. "That's why I give people phone numbers for our offices in Mexico, in Denver, and our Web site address."

The loans are in fact provided by the government-run Sociedad Hipotecaria Federal (National Mortgage Bank), the Mexican equivalent of Fannie Mae. The SHF funded over 52,000 homes in 2004, mostly through private mortgage lenders.

"There's no danger that the money will disappear, as ... (lenders) are subject to strong regulation," said Hector Alcudia, spokesman for SHF.

SHF's funding is public, but the organization is trying to spur a secondary mortgage market by issuing mortgage-backed securities.

"When the private sector funds most mortgages, the interest rates will go down," said Alcudia.

That would be welcome news for prospective clients turned off by annual fixed interest rates surpassing 10 percent. In the meantime, the peso's devaluation might make up for the high cost of borrowing money, lenders say.

"The debt is in pesos, but monthly payments here are in U.S. dollars that are converted at the exchange rate of the day," said Conficasa representative Silvia Torres. When the peso drops, the debt's equivalent in U.S. dollars shrinks, she said.

In Zamora, Barriga's mother, Maria Guadalupe Rico, eagerly awaits her daughter's arrival. She contributed to the down payment on the house, hoping her daughter might one day come back.

"The house is for ... (Elizabeth), and I will maintain it while she's there," said Rico. "She is young and is saving money, but when she's older, she'll come back home to her parents."