The World's Lorne Matalon reports on how Mexico has avoided a rise in foreclosures like the one in the United States. The Mexican government reformed its mortgage industry more than a decade ago to help struggling homeowners lower their payments in times of economic stress.
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LISA MULLINS: Here in the United States, millions of homeowners continue to struggle to make their mortgage payments. Today, the Obama administration launched a new foreclosure relief program to help them out. Other countries around the globe are also struggling with rising mortgage default rates – but not Mexico. Our southern neighbor reformed its mortgage industry more than a decade ago, in the wake of a previous financial crisis. Now that reform is paying off, as The World's Lorne Matalon reports from Mexico City.
LORNE MATALON: Homebuilders here can't keep up with demand. Brokerage houses such as Morgan Stanley say that's because mortgage financing for low and middle-income families is healthy. There are no sub-prime or variable rate mortgages. The two government financed banks that issue 80 percent of Mexico's mortgages provide mandated insurance and offer payment reductions should mortgage holders fall into financial hardship – and many in the low-income community of Tecamac are. Knocking on the door is bank representative Pamela Morales Diaz. She's coming to visit the family of Monroy Reyes Rodrigo, who just lost his job. Diaz's bank is offering a new deal: a restructured mortgage on their modest house 3 hours drive outside Mexico City. Diaz offered up a substantial monthly reduction – from 400 to $130 dollars a month. The mortgage insurance will cover the difference until the family can get back on its feet. If it can't, Monroy, his wife Ysmeralda, and their two daughters can still keep their home as long as they maintain their payments. Ysmeralda says the restructuring was necessary because the monthly payments were unaffordable after her husband lost his sales job. Federal Cabinet minister Ariel Cano is Mexico's Housing Commissioner. He says lower payments and mandated mortgage insurance for low and middle-income mortgage holders in difficulty is preferable to people losing their homes.
CANO: If there is the willingness to pay, if you have maintained your current payment, you will get a bonus of mortgage that will be paid for you. I think that is a proactive vision, not a reactive one, because in economies such as Mexico's in the past, that you have high volatility, we learned that it's better to design it in advance in order to protect the borrower and also to protect the lender.
MATALON: The former head of Mexico's Import Export Bank, Jose Luis Romero Hicks, is now a leading housing industry analyst, providing advice to homebuilders and Mexican banks.
HICKS: In most of the world nowadays, anything related to mortgage is synonymous with high risk. Mortgages in Mexico are an opportunity for economic growth and social development. And I think that if anything, Mexico is not only prepared to confront the current crisis but also jumpstart the economy in harsh times.
MATALON: Though just under half of Mexican households live in poverty, nearly 90 percent own their own homes. Of course, the quality of housing varies widely, and some Americans would find many Mexican houses crowded. But Mexico's mix of private and government-supported banks compete to offer options to low and middle-income families to keep their homes even when they endure financial hardship. For The World, I'm Lorne Matalon, in Tecamac, Mexico.
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