International Finance Corporation: Housing Finance

	-- Related Links -- IFC IFC's Operations Evaluation IFC: The Equator Principles

AT A GLANCE:

• IFC’s housing finance mission is to increase access to housing and mortgage finance in developing countries, with an emphasis on increasing the availability and affordability of housing. 

• Housing finance is one of the fastest growing areas of investment for the IFC, and a priority sector because it generates economic growth through job creation, entrepreneurship, and economic linkages.

• A home is both a shelter and a real asset, which might be the largest investment a family makes in a lifetime.

• Housing finance activities also spur expansion in financial and capital markets.

OVERVIEW

IFC has invested in more than 90 deals in 35 countries totaling $1.8 billion in IFC commitments, with strong growth during fiscal years 2005-2006. The scope of IFC’s investment projects is broad.  They include projects in and with primary market originators (banks and other types of originators), investments in and with secondary market companies, and investments in capital markets instruments, notably mortgage-backed securities and similar funding vehicles. 

Housing Finance Products

IFC products are varied, they include equity and quasi-equity, debt products in the form of direct lines of credit (secured and unsecured), purchase of intermediate tranches of mortgage-backed securities issues, warehouse lines of credit, and partial credit guarantees that may be used to support issuance of local currency denominated securities or loans to fund mortgage production. 

Technical Assistance

IFC offers housing finance technical assistance that is linked to its investments.  Priority areas include housing finance market infrastructure, legal and regulatory frameworks, institutional capacity building, and staff training.  Funding comes from IFC and donor governments.  Technical assistance programs almost quadrupled in fiscal years 2003 to 2006 from $2.3 million to $10 million. IFC also works with the World Bank and other partners to provide housing finance advisory services to governments.

Track Record of Innovation in Housing Finance

• First mortgage-backed securities in Korea, Colombia, South Africa, and Mexico.

• First secondary mortgage market entity in Trinidad and Tobago, Colombia, and Argentina.

• First securitized non-performing loan transaction in Colombia.

• First collateralized warehouse mortgage line in Mexico ($300 million).

• First cross-border mortgage-backed securitization in the Baltics.

• First second mortgage program (Latvia).

Mexico Case Study

IFC’s housing finance strategy in Mexico, launched in 2004, has been heralded for its focused and programmatic approach to supporting the development of the sector and providing funding to key players.

First Phase:  This stage focused on helping developing a vibrant primary mortgage market through local currency debt facilities to major originators in the sector, including Su Casita, Hipotecaria Nacional, and Hipotecaria Credito y Casa.

Second Phase:  Now IFC is focusing on providing warehouse credit lines to support mortgage securitizations, and other capital market securities, and is also supporting the development of a viable secondary mortgage market conduit.

IFC has been credited directly with contributing to the growth of both the secondary and primary market, and has to date invested close to $400 million in the Mexican housing sector. 

Saudi British Bank—Products compliant with Islamic finance principles

IFC has provided its first funding for a Murahaba facility, a product compliant with Islamic finance principles, by extending a credit line in the equivalent of $50 million in local currency Saudi riyal to Saudi British Bank to grow its housing finance portfolio.  The project has enabled longer-term loans with lower monthly payments, making home ownership a reality for more lower-income families.

Updated August 2006

Media Contact: Rita Jupe (202) 458-8967, rjupe@ifc.org, www.ifc.org