As access to affordable housing becomes a global problem, many countries are trying to utilize different financing mechanisms. In Brazil, securitization was attempted to increase access to mortgage markets, but was unsuccessful due to a highly distorted market. The International Finance Corporation (IFC) invested in a Brazilian secondary market facility in 2004 that was owned by one of the country’s major banks – and it was successful in issuing mortgage-backed securities, but not in developing the market.
Due to heavy government bond issuance, the private sector was crowded out of the market and represented only a small share of both the mortgage and securities markets. Government subsidized funding dominated the market, and with an underdeveloped capital market, there was an issue with a lack of standardization and high transaction costs of issuance. Investors also didn’t accept the securities’ interest rate index.
Source:
World Bank Group. (2016) World Bank Group Support for Housing Finance. International Bank for Reconstruction
and Development / The World Bank.
Link: https://ieg.worldbankgroup.org/evaluations/world-bank-group-support-housing-finance