Introduction

La Hipotecaria S.A. (Republic of Panama) and La Hipotecaria S. A. de C. V. (El Salvador) are Central America's only full-service, non-banking mortgage company, dedicated to the origination, servicing and securitization of residential mortgage loans. La Hipotecaria (translated as ¨The Mortgage Company¨), has established its reputation as a leading mortgage lender by providing competitive loan programs and an unequalled ability to provide prompt, personalized service not available in state or privately owned banks. La Hipotecaria provides long-term residential mortgage financing in United States Dollars (the legal currency of Panama and El Salvador) to qualified clients in the middle and middle-lower income sectors. Furthermore, La Hipotecaria is a pioneer in the creation of investment-grade mortgage-backed securities which it offers through local stock exchanges to local institutional investors, while retaining servicing rights on all originated mortgage loans.

A Brief Company History

La Hipotecaria began operations in May of 1997 and is a subsidiary of Grupo ASSA, S.A., a company whose shareholder equity exceeds US$300,000,000 and is owner of one of the regions most important insurance companies; ASSA Insurance Company rated "A" (Excellent) by A.M. Best. Today, La Hipotecaria employs 172 people in its 11 offices in Panama and El Salvador and administers a residential loan portfolio of over 13,500 mortgage loans. La Hipotecaria enjoys the support of many international banks who provide warehousing lines of credit and the support of numerous institutional investors who invest in the various financial instruments issued in local markets by the La Hipotecaria.

Loan Origination Activities

Since initiating operations in Panama City, Panama in 1997, La Hipotecaria has become one of the country's most important providers of mortgage loans for borrowers in the middle to lower-middle income market. For borrowers whose average family income ranges from $400 to $800 per month. Today, La Hipotecaria consistently approves more than $12,000,000 in mortgage loans per month with an average loan size, per mortgage of approximately $23,000. The majority of La Hipotecaria´s clients are first-time home buyers. La Hipotecaria lends to borrowers who purchase homes in a large diversity of projects and no one real-estate developer or real-estate project accounts for more than 5% of the total loan portfolio serviced by La Hipotecaria. Furthermore, in order to maintain its objectivity in loan origination activities, La Hipotecaria does not lend to real estate projects in which shareholders or directors have a direct or indirect interest, nor does it provide construction financing.
Loan qualifications, which are patterned after guidelines established in other developed markets, are stringent but fair. Clients must show continuity of employment, a clean credit history, and an income to mortgage payment ratio of approximately 30%. After more than ten years of providing mortgage loans in Panama, it appears that the firms loan underwriting criterion are satisfactory as loan delinquency rates,as segregated by vintage, have consistently remained less than 1%.

Local Mortgage Loan Securitization Activities

In May of 1999, in what was the first structured mortgage securitization ever completed in the Central American Region, La Hipotecaria served as Trustee of The First Mortgage Trust.(El Primer Fideicomiso de Préstamos Hipotecarios) a special purpose vehicle (SPV) or separate legal patrimony of 595 residential mortgage loans which served as guarantee for a $15,000,000 mortgage-bond issue. Since that date and with the experience gained each year, La Hipotecaria has continued to issue mortgage-backed securities at the rate of approximately one issue per year and as of today has successfully completed seven MBS transactions. All of its securitizations have been approved by the Panamanian Securities and Exchange Commission (La Comisión Nacional de Valores de Panamá), sold through the Panamanian Stock Exchange (La Bolsa de Valores de Panamá) and fully subscribed by institutional investors. All issues have been rated by an internationally recognized rating agency (Fitch) who has qualified the M.B.S issued by La Hipotecaria as "investment grade" in the local markets.

International Mortgage Loan Securitization Activities

In March of 2007 in one of the most important structured finance transactions in the Central American Region, La Hipotecaria acting as Trustee of the Eighth Mortgage-backed Notes Trust placed through the Panamanian Securities Exchange $90,000,0000 in MBS.  The Series A Notes, representing $76,050,000 were rated BBB by Standard & Poors  y Fitch Ratings y Baa2 by Moodys; the first time that a local issuance received an investment grade rating on an international scale by the three major rating agencies. 

Simultaneously, La Hipotecaria Panamanian Mortgage Trust 2007 – 1, a Delaware domiciled Grantor Trust acquired $73,050,000 of the Series A notes and issued parallel debt certificates in the United States under SEC regulation 144A.  With the inclusion of a financial guarantee policy issued by XL Capital Assurance Inc. the certificates were rated AAA by Standard & Poors and Aaa by Moodys, their highest rating on an international scale.  All certificates were successfully place with institutional investors in the United States.

Technological Platform

In order to support its mortgage-loan origination, servicing and securitization activities, La Hipotecaria has developed a fully-integrated proprietary software platform unique in the Latin-American Region. The system manages all aspects of mortgage-loan servicing including, insurance management, preparation of borrower account statements, interest-rate adjustments, loan restructuring, and the management of all auxiliary accounts. The system also manages all aspects of the securitization process, including the administration of prioritized cash flows in multi-traunched transactions. Data fields are designed in accordance international standards for mortgage loan securitization activities, thus providing the historical data to support an ongoing securitization program and comply with rating-agency requirements. All client interfaces are presented in Spanish.
The System is legally registered as intellectual property of Online Systems, S.A., a wholly owned subsidiary of La Hipotecaria (Holding) Inc.

Summary

Although small in comparison to the activities of mortgage operations in larger developed countries, the activities of La Hipotecaria in The Republic of Panama have had a significant positive impact on the local primary and secondary mortgage markets. As La Hipotecaria grows its loan-origination capacities and prepares for future issues, with each subsequent loan securitization, La Hipotecaria refines its legal and technological capacity which in turn, improves the quality of its future-mortgage backed securities and the lives of many latinoamerican households.