Mexico RMBS Attempts Hito Comeback

Mexican RMBS issuers face extremely challenging borrowing conditions, but some are trying to source liquidity with a structure developed by Hipotecaria Total (HiTo). Erstwhile frequent RMBS issuer Su Casita – which has been shut out of the market for months – is preparing to issue a new note worth around $100m that could carry an average tenor of 7 years, say people familiar with the trade. So far, the so-called “traditional bonhitos” and “macro hitos” have been far smaller in issue size, topping out at around $10m-$15m equivalent. But the structure, typically rated AAA locally, is about to get tested on a broader scale as Su Casita prepares its debut. “Sofoles will find it difficult to issue [borhis] for at least a couple of years,” says Mark Zaltzman, CFO at Hipotecaria Vertice, and a former finance official at Su Casita. He says that until then, the macro-hito model is the only option to issue mortgage-backed paper. Vertice is considering such an issue for itself in the near future, says Zaltzman. Hitos offer investors increased collateral and better safeguards against default than typical borhis, according to an executive at HiTo, local bankers and rating agency analysts. The macro hito, being considered by sofoles, requires a high level of collateral in the form of cash. In the case of one recent deal issued by HiTo itself, cash equal to 27% of the total value of the deal is kept in escrow and invested in AAA government bonds. HiTo uses rating agency analysis, SHF standards and its own methodology to try and reach 99% probability of repayment on the mortgage credits being securitized, says Isaac Lopez, HiTo’s treasurer. The individuals owning the mortgages have the option of making interest payments on the notes with cash, or by purchasing the securitized instruments back from holders.