Developmental Investment Activities
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Brazil
In a pair of innovative operations, the Corporation will help make affordable housing available in Brazil and contribute to the development of the secondary market for mortgage-backed securities.
In the first of the two operations, Brazilian Mortgages Companhia Hipotecária (a real estate financing company that provides mortgage loans to middle- and lower-income individuals) will receive a $200,000 subordinated loan from the IIC, and Brazilian Securities Companhia de Securitização (a securitization company) will receive a $300,000 subordinated loan and sell the IIC $10 million in mortgage-backed securities.
The two companies will target the residential segment with an average home price of $30,000. Brazilian Mortgages will originate the mortgages and sell them to Brazilian Securities. The latter will issue mortgage-backed securities to the IIC. As the secondary mortgage market develops, the IIC will sell these securities through Brazilian Securities to secondary market investors, including insurance companies and pension funds.
IIC's financing will enable the construction of around 11,000 new homes in São Paulo. The project will also contribute around $28 million annually to Brazil's GDP.
In the second of the two operations, Serviços Financeiros Imobiliários Ltda. (SFI) will receive a $1 million subordinated loan from the IIC. SFI services residential mortgage loans for financial institutions, mortgage companies, real estate developers, and Brazilian government agencies. It also provides loan processing and origination services and due diligence reviews to banks.
The IIC loan will enable SFI to expand its operations. Services of this type are an important missing ingredient for the development of the mortgage market in Latin America and perhaps the most important factor in gaining and maintaining investor confidence and attracting capital to the housing sector. Brazil needs financial alternatives to meet the growing demand for housing, particularly in the low- and middle-income segments. The IIC is contributing by supporting a company that provides high quality, independent mortgage servicing that is otherwise unavailable in Brazil, and that is a crucial element in the development of a secondary mortgage market.
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