Introduction to Infonavit and its Significance
The Instituto del Fondo Nacional de la Vivienda para los Trabajadores (Infonavit) is Mexico’s primary provider of housing credit, impacting not only its beneficiaries but also serving as a benchmark for the entire housing industry. Recently, Infonavit’s rising delinquency rate has sent a concerning signal to the housing market.
Infonavit’s Delinquency Rate vs. Commercial Banking Sector
In September, Infonavit’s delinquency index (Imor) reached 19.40%, its second-highest level in recent years, just below June 2023’s 19.51%. In contrast, the commercial banking sector’s housing portfolio reported an Imor of 3.11% during the same period, six times lower than Infonavit’s.
Industry Perspectives and Risks
Industry experts view this delinquency rate as a significant risk signal for the housing market. Edgard Mercado, founder of Solviing, a firm specializing in used housing sales, explains that Infonavit’s delinquency rate implies a negative message to the market: “People may think they don’t need to pay back their loans because there won’t be any consequences.”
Mercado further elaborates that high delinquency rates complicate access to housing financing, as banks perceive increased risk in the market. This could lead to higher interest rates, which, combined with high housing prices and limited incomes, make it difficult for individuals to afford a home.
High Housing Prices and Limited Incomes
Mercado emphasizes that current housing prices are extremely high, making it challenging for people with available income to purchase a home. He states, “With the income people have today, they can’t afford what’s on the market.”
Infonavit’s Risk Factors and Capacity to Manage Losses
As of September, Infonavit managed a 1.9 trillion-peso portfolio. However, the growth of its current portfolio slowed down while the delinquent portfolio experienced a “sudden increase,” according to Banxico.
Banxico’s recent financial stability report highlights that Infonavit’s primary risk is the unemployment of its credit recipients. In such cases, employers cannot carry out direct payroll deductions, and the portfolio’s behavior depends on the borrowers’ willingness to pay.
Despite Infonavit’s delinquency, Banxico believes the organization can handle potential losses due to its solvency: “Infonavit has sufficient reserves and capital to address potential losses from delinquent loans.”
“Herencia Maldita” or Past Administration Issues?
Recently, Octavio Romero Oropeza, Infonavit’s general director, stated that the organization’s delinquency rate is not a recent reflection of deterioration but rather a problem inherited from past administrations. He explained that previous credits were “unpayable” due to growing balance collection schemes.
Romero Oropeza asserts that the effective delinquency of credits originated from 2019 is considerably lower and comparable to the commercial banking sector.
To address this issue, Infonavit has initiated the restructuring of over 4.8 million credits, offering benefits to credit recipients to settle their debts. As of early December, the organization had restructured more than 2.5 million credits, with the remaining to be addressed in the following month.
Key Questions and Answers
- What is Infonavit and why is its delinquency rate important? Infonavit is Mexico’s primary housing credit provider, impacting both its beneficiaries and the broader housing market. Its rising delinquency rate signals potential risks.
- How does Infonavit’s delinquency rate affect the housing market? High delinquency rates complicate access to housing financing, potentially leading to increased interest rates and making it difficult for individuals with limited incomes to afford high housing prices.
- What are the primary risks for Infonavit? The main risk for Infonavit is unemployment among its credit recipients, as employers cannot carry out direct payroll deductions in such cases.
- How is Infonavit addressing its delinquency issues? Infonavit has initiated the restructuring of over 4.8 million credits, offering benefits to credit recipients to settle their debts.
- What is the “herencia maldita” mentioned by Infonavit’s director? “Herencia maldita” refers to problems inherited from past administrations, including unpayable credits due to growing balance collection schemes.
