Hipotecaria Su Casita, S.A. de C.V. (HSC) and El Puerto de Liverpool, S.A.B. (EPL) (MXK: LIVEPOLC1) have signed a collaboration agreement under which they will provide loans to consumers to finance home furnishing or appliance purchases at Liverpool and Fabricas de Francia department stores, both of which are operated by EPL, according to a September 4, 2008 report in El Universal. 

The loans will available to consumers who obtain mortgage loans from HSC and do not borrow the maximum authorized amount, as determined by HSC based on consumer credit histories and income levels.  Such consumers will be offered a credit card, branded with both the HSC and EPL logos, that enables them to use the difference between the amount they actually borrow for their mortgage loans and the maximum authorized amount to make home furnishing and applicance purchases at Liverpool and Fabricas de Francia department stores.  Gonzalo Palfox, director of business development at HSC, said in the report that HSC has determined that 30% of Mexican mortgage loan borrowers do not use maximum authorized amount of mortgage financing.

The loans will bear interest at 35% per year, mature in five years, and be prepayable by consumers without penalty, according to a report in El Financiero.  The report also said that the collaboration agreement provides that EPL will place HSC kiosks in its Liverpool and Fabricas de Francia department stores, where consumers may request information about HSC mortgage loans.   

HSC was founded in 1994 as the first specialized mortgage lender in Mexico.  It is structured under Mexican law as a limited purpose finance company (sociedad financiera de objeto limitado – SOFOL), which means, very generally, that it is a specialized financial institution in terms of the types of loans it grants.  SOFOLs became particularly prominent in Mexico’s mortgage sector after December 1994, when the tequila crisis resulted in the collapse of the Mexican banking system and the banks ceased all mortgage lending operations.  SOFOLs, which now offer loans in various sectors of the Mexican finance market (e.g., agriculture, automotive, consumer goods, real estate, etc.), are not authorized to accept deposits.

Mexican pawnshop operator Prendamex and Mexico’s National Pawnshop Association (Asociación Nacional de Casas de Empeño – ANACE) are drafting a proposal for regulation of pawnshops in Mexico, according to a report in today’s El Financiero.  

Prendamex’s CEO, Roberto Alor, said in the report that Mexico’s pawnshops must be regulated to maintain the integrity of the market, which consists of approximately 4,500 pawnshops nationwide.  He also said that regulations should obligate pawnshop operators to maintain insurance and post an irrevocable bond to ensure that they will honor their obligations to customers. 

Interest rates on pawn loans issued by Mexican pawnshops that are ANACE members generally fluctuate between 4% and 8% percent per month, according to Aldolfo Venez, President of ANACE, who was quoted in the report.  The report said that neither ANACE nor Prendamex indicated when the proposed regulations would be released.

A pawn loan is a loan of money to a consumer borrower secured by personal property of the borrower.  In Mexico, pawn loans are typically documented by a short-form loan and pledge agreement (contrato de mutuo con garantia prendaria).

Businesses engaged in the sale or assignment of loans or other extensions of credit in Mexico, whether through securitization or otherwise, may wish to read a nice article published in the July 31, 2008 issue of Latin American Law & Business Report by my colleagues John E. Rogers and Leonora Olmedo Beltran.

The article discusses the February 2008 amendments to the Law Regulating Credit Information Companies (Ley Para Regular las Sociedades de Informacion Crediticia), which mandate that any financial institution or other lender that sells or assigns to any other person loans or receivables that were previously reported to any Credit Information Comapany (Sociedad de Informacion Crediticia – CIC) inform the CIC thereof within 20 business days after the relevant customer of the financial institution or other lender is required to be so notified under applicable law.  The article suggests that the failure of the seller or assignor and buyer or assignee to contractually agree regarding which party will assume the reporting and other obligations set forth in the amendments could lead to unintended consequences.

Alberto Vilar, chief executive of MetLife Mexico, S.A., forecasts 8%-10% growth in Mexico’s life insurance market in 2008, according to a report by Ken Parks of Dow Jones Newswires released on May 30, 2008. 

MetLife Mexico’s life insurance sales in Mexico totaled MN$23.08 billion (approximately US$2.23 billion) in 2007, giving the company a 30% share of the total market.  Life insurance appears poised for growth in Mexico because of the country’s young population, emerging middle class, and limited use of financial services.   

One of MetLife Mexico’s target markets is lower- to middle- income Mexicans, to which it has been selling life insurance since 2006 through a joint venture with Wal-Mart de Mexico (WALMEX.MX).

Banks may be tightening commercial lending for transactions in the U.S., but U.S. and foreign banks appear ready, willing, and able to fund transactions in Mexico and many other Latin American countries on reasonable terms, including commercial real estate development transactions and leveraged business acquisitions.