Colombia:
Rule of Law, Creditor Rights and the
Crisis of Housing Finance
Mauricio Cárdenas
Alejandro Badel
1
Outline
1.
2.
3.
4.
Macroeconomic relevance
Overview of the mortgage sector
Perils of indexation
Other causes (and consequences) of
the crisis
5. Creditor rights
6. Econometric analysis
7. Fiscal costs
2
Macro relevance
3
Cyclical Components of Mortgage Disbursements,
Construction GDP and Total GDP
100%
30%
Disbursements of Mortgage Loan
75%
20%
50%
10%
25%
0%
0%
-10%
-25%
-50%
-20%
-75%
-30%
Construction GDP
-100%
-40%
100%
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
Disbursements of Mortgage Loan
75%
50%
25%
0%
-25%
-50%
-75%
2001:1
1999:1
1997:1
1993:1
1991:1
1989:1
1987:1
1985:1
1983:1
1981:1
1979:1
1977:1
1995:1
Total GDP
-100%
4
Granger Causality between GDP and
mortgage origination
Causality
Lags
Sample
Statistic F
Probability
GDP Cycle Causes Construction GDP Cycle
Construction GDP Cycle Causes GDP Cycle
2
1977:1 2002:2
3,583
0,976
0,032
0,381
GDP Cycle Causes Disbursements of Mortgage Loans Cycle
Disbursements of Mortgage Loans Cycle Causes GDP Cycle
2
1977:1 - 2002:2
0,859
2,474
0,427
0,090
GDP Construction Cycle Causes Disbursements of Mortgage Loans Cycle 2
Disbursements of Mortgage Loans Cycle Causes GDP Construction Cycle
1977:1 - 2002:2
3,701
3,654
0,028
0,030
GDP Cycle Causes GDP Construction Cycle
GDP Construction Cycle Causes GDP Cycle
1
1990:1 - 2002:2
0,050
4,418
0,824
0,041
GDP Cycle Causes Disbursements of Mortgage Loans Cycle
Disbursements of Mortgage Loans Cycle Causes GDP Cycle
2
1990:1 - 2002:2
0,008
3,222
0,992
0,049
GDP Construction Cycle Causes Disbursements of Mortgage Loans Cycle 2
Disbursements of Mortgage Loans Cycle Causes GDP Construction Cycle
1990:1 - 2002:2
3,405
16,979
0,042
0,000
5
Granger Causality between Cyclical
Components (1977-2002)
Disbursements of
Mortgage Loans
Construction GDP
(all but the 90s)
Construction GDP
Total GDP
(Only the 90s)
Total GDP
Disbursements of
Mortgage Loans
6
Rolling Correlation
80%
Correlation with the
Disbursements of
Mortgage Loans
Cycle
Correlation coefficient*
70%
60%
Construction GDP Cycle
50%
40%
30%
Total GDP Cycle
20%
10%
0%
-10%
-20%
100%
60%
40%
20%
0%
-20%
-40%
*"Rolling Correlation" using a 10 year window of data
2001:4
2000:4
1999:4
1998:4
1997:4
1996:4
1995:4
1994:4
1993:4
1992:4
1991:4
1990:4
1989:4
1988:4
1987:4
-60%
1986:4
Correlation
between Total GDP
and Construction
GDP Cycles
Correlation coefficient*
80%
7
OVERVIEW OF THE
MORTGAGE SECTOR
8
Mortgage Banks in 2002
900
Mortgage Loans
800
700
% Total assets
59%
57%
53%
48%
43%
US$ M
600
35%
500
400
300
200
12%
100
AV VILLAS
BANCAFE
COLMENA COLPATRIA
CONAVI
DAVIVIENDA GRANAH
9
Mar-73
Mar-74
Mar-75
Mar-76
Mar-77
Mar-78
Mar-79
Mar-80
Mar-81
Mar-82
Mar-83
Mar-84
Mar-85
Mar-86
Mar-87
Mar-88
Mar-89
Mar-90
Mar-91
Mar-92
Mar-93
Mar-94
Mar-95
Mar-96
Mar-97
Mar-98
Mar-99
Mar-00
Mar-01
Billions of 1998 pesos
Disbursements of Mortgage Loans
450
400
350
300
250
200
150
100
50
0
10
Outstanding mortgage loans
(1998 pesos, % of GPD, and % of total credit)
18
27%
16
% of Total credit
12
10
17%
Constant pesos
8
12%
6
4
7%
2
2%
% of GDP
0
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
%
22%
billions of 1998 pesos
14
11
0
Jun-02
Dic-01
Jun-01
Dic-00
Jun-00
Dic-99
Jun-99
Dic-98
Jun-98
Dic-97
Jun-97
Dic-96
Jun-96
Dic-95
Jun-95
Dic-94
%
Non-performing mortgage loans
(as % of total mortgage loans)
25
20
15
Debt restructuring
10
5
12
Mortgage Banks
Composition of Assets
100%
80%
60%
40%
20%
Mortgage Loans
Other Loans
Portfolio Investments
Ag-02
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
0%
Other assets
13
Mortgage Banks
Composition of Liabilities
100%
80%
60%
40%
20%
Indexed Liabilities
Peso liabilities
Ag-02
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
0%
Other liabilities
14
Mortgage Banks
Composition of Deposits
100%
80%
60%
40%
20%
Savings and current account
Less than one year
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
0%
More than one year
15
Summary
1) Disbursements currently at their
historically lowest point.
2) 21.5% of the mortgage portfolio
was delinquent by February 2003.
3) Interest rate and maturity
mismatch.
16
The perils of indexation
17
Oct-73
Oct-74
Oct-75
Oct-76
Oct-77
Oct-78
Oct-79
Oct-80
Oct-81
Oct-82
Oct-83
Oct-84
Oct-85
Oct-86
Oct-87
Oct-88
Oct-89
Oct-90
Oct-91
Oct-92
Oct-93
Oct-94
Oct-95
Oct-96
Oct-97
Oct-98
Oct-99
Yearly Growth Rates: UPAC and CPI
38%
33%
CPI
28%
23%
18%
UPAC
13%
8%
18
60
Sep-72
Sep-73
Sep-74
Sep-75
Sep-76
Sep-77
Sep-78
Sep-79
Sep-80
Sep-81
Sep-82
Sep-83
Sep-84
Sep-85
Sep-86
Sep-87
Sep-88
Sep-89
Sep-90
Sep-91
Sep-92
Sep-93
Sep-94
Sep-95
Sep-96
Sep-97
Sep-98
Sep-99
Sep. 1972 = 100
Real UPAC (UPAC / CPI)
100
90
80
Real UPAC
70
New UPAC for
“restructured” loans
50
19
Oct-72
Oct-73
Oct-74
Oct-75
Oct-76
Oct-77
Oct-78
Oct-79
Oct-80
Oct-81
Oct-82
Oct-83
Oct-84
Oct-85
Oct-86
Oct-87
Oct-88
Oct-89
Oct-90
Oct-91
Oct-92
Oct-93
Oct-94
Oct-95
Oct-96
Oct-97
Oct-98
Oct-99
Oct-00
Oct-01
UPAC, UVR and CPI: Monthly percent
changes
7%
6%
% CPI
% UPAC - UVR
5%
4%
3%
2%
1%
0%
-1%
20
OTHER CAUSES
(AND CONSEQUENCES)
21
HPI DNP BOGOTA
HPI DNP MEDELLIN
HPI DANE
nov-02
nov-01
nov-00
nov-99
nov-98
nov-97
nov-96
nov-95
nov-94
nov-93
nov-92
nov-91
nov-90
nov-89
nov-88
nov-87
nov-86
April 1998=100
Housing Price Index (HPI)
Deflated by CPI
140
130
120
110
100
90
80
70
60
HPI Camacol
22
Unemployment rate
(observed and simulated)
20%
Unemployment (keeping the December 1997 construction employment constant)
80.000 employees
18,0%
17,8%
16,6%
196.000 employees
Unemployment (keeping the September 95)
Observed unemployment rate
15%
10%
Mar-02
Mar-01
Mar-00
Mar-99
Mar-98
Mar-97
Mar-96
Mar-95
Mar-94
Mar-93
Mar-92
Mar-91
Mar-90
5%
*Unemployment rate in 13 metropolitan areas (Jan 00 – Jun-02) applying growth to
seven areas (Mar 90 – Dec 99)
23
The role of creditor protection
24
Foreclosure Proceedings
LAWSUIT
Request of embargo
and sequestration of
assets
Acceptance
(30 days)
Non
acceptance
(30 days)
Non
corrections
ESTIMATE
OF ASSETS
PRICE
Order of sale by
auction (No dateline)
(Embargo, sequestration
and estimated)
PUBLICATION OF ADS (5
days before the auction)
Due Notified to the defendant
(20 days)
Presentation of the
defendants pleadings (10 days)
Order of embargo (30 d)
and sequestration (90d)
Correction
(5 days)
Rejection
(Delay 2 months)
Approved by
the Judge
Sale by auction
day)
(BID, AWARD, NO
DATELINES FOR
BIDDERS)
SENTENCE:
-Orders to continue the proceedings of the lawsuit.
-Orders to estimate the price and the sale by
auction of the assets under embargo
-Orders to liquidate the credit.
Liquidation of credit and
expenses by the
defendant if is not done
by the plaintiff (10 days
and 3 of notice for the
plaintiff)
Definitive Liquidation
by the court (It has no
dateline)
(1
No presentation of the
defendants pleadings
LEGALIZATION
AND DELIVER OF
THE ASSET SOLD
BY AUCTION
Liquidation of credits and
expenses by the plaintiff
(10 days and 3 of notice
for the defendant)
25
Average Time of Foreclosure
ICAV (2002)
CEJ (1998)
CSJ (1998)
Normative
time
0
200
400
600
800
1000
# of calendar days
1200
1400
1600
26
Foreclosure proceedings
130.000
128.316
Number
Balance
5.252.000
120.000
5.000.000
114.766
4.900.000
4.831.195
4.800.000
Millions of Pesos
5.100.000
5.119.104
Number
5.200.000
124.116
125.000
115.000
5.300.000
110.000
4.700.000
105.000
4.600.000
Dic-01
Mar-02
Jun-02
27
Probability of property being foreclosed
100%
Cumulative probability
90%
80%
Bank 3
Bank 2
70%
60%
Bank 1
50%
40%
30%
20%
10%
0%
0
10
20
30
40
50
60
70
80
90 100 110 120
Months in delinquency
28
ECONOMETRIC ANALYSIS
29
Data
Aggregation Level: Individual Loans.
Number of banks: 2.
Scope: Approx. 30% of housing credit.
Sample: January 1994 - June 2002.
Size: 240,350 loans, with an outstanding
balance of 2.3 billions pesos (June 2002)
and an original balance of 8.8 billions pesos.
30
Mortgage Loans by Origination Year
Año de
Originación
antes de 1980
1980 - 1984
1985 - 1989
1990 - 1992
1993 - 1994
1995 - 1996
1997 - 1998
1999 - 2000
2001 - 2002
2002
Total
% Saldo
Inicial*
0,0
2,2
8,6
6,2
13,2
20,7
29,3
17,0
1,9
0,9
100,0
%Créditos en
% Número de dación de
Créditos**
pago
0,0
1,9
10,3
5,8
13,0
16,3
26,4
21,2
3,2
1,8
100,0
4,5
0,4
0,4
0,6
1,1
4,4
5,2
3,1
0,0
0,0
3,0
Plazo
Original***
(meses)
176,9
179,5
177,1
178,1
177,8
179,3
175,5
172,6
162,3
163,6
176,1
% LTV
% Tasa*** Original***
8,3
6,8
6,8
9,0
9,7
12,4
13,0
12,1
11,9
11,9
11,3
0,24
0,38
0,48
0,45
0,53
0,51
0,52
0,55
0,52
0,55
0,52
Altura de
Mora***
158,8
2,7
1,8
1,6
1,5
2,1
2,3
1,7
0,3
0,0
1,9
31
Mortgage Loans by Rate Range
Rango de Tasa
Menos del 1%
1% - 2%
2% - 3%
3% - 4%
4% - 5%
5% - 6%
6% - 7%
7% - 8%
8% - 9%
9% - 10%
10% - 11%
11% - 12%
12% - 13%
13% - 14%
Total
% Tasa***
0,0
2,0
3,0
4,0
5,0
5,4
6,7
7,8
8,6
9,8
11,0
12,0
13,0
13,9
11,3
% Saldo
Inicial*
0,0
0,0
0,1
0,0
6,3
0,6
7,3
3,3
4,7
4,3
18,3
9,8
7,1
38,1
100,0
% Número %Créditos
Plazo
% LTV
de
en dación Original***
Créditos** en pago
(meses) Original***
0,1
0,0
0,1
0,0
12,3
0,8
7,1
4,0
4,2
4,2
28,7
7,4
4,8
26,4
100,0
4,3
2,5
1,1
0,2
0,5
1,6
0,8
1,7
1,7
3,8
3,7
6,4
3,0
119
171
177
145
178
171
174
165
176
175
177
185
177
174
176
54,7
53,7
57,8
50,8
63,3
40,0
46,0
50,4
51,1
48,4
57,5
48,1
46,1
50,7
51,7
Altura de
mora***
(meses)
2,4
0,9
0,5
2,1
1,9
1,2
2,0
1,3
1,5
2,0
1,5
1,6
1,3
2,5
1,9
34
Origination Rate for VIS and Non VIS
Mortgage loans*
6,0%
5,0%
Non VIS
4,0%
3,0%
VIS
2,0%
1,0%
Feb-02
Ago-01
Feb-01
Ago-00
Feb-00
Ago-99
Feb-99
Ago-98
Feb-98
Ago-97
Feb-97
Ago-96
Feb-96
Ago-95
Feb-95
Ago-94
Feb-94
0,0%
*Origination Rate = Value of Originated Loans in t / Value of Outstanding loans in t-1.
35
Determinants of the Origination Rate
LOG(ORIGTOT)
Variable Dependiente
OLS
Procedimiento
-3,75
Constante
-2,31
Estadístico t
0,02
Probabilidad
-0,55
DUM99-01
-4,45
Estadístico t
0,00
Probabilidad
0,29
LOG(Variable Dependiente (-1))
3,08
Estadístico t
0,00
Probabilidad
-0,28
LOG(VENCIDA(-1))
-2,65
Estadístico t
0,01
Probabilidad
-0,55
LOG(CUBRIMIENTO(-1))
-5,25
Estadístico t
0,00
Probabilidad
LOG(LIQUIDEZ(-1))
Estadístico t
Probabilidad
LOG(SOLVENCIA(-1))
Estadístico t
Probabilidad
LOG(TASA(-1))
Estadístico t
Probabilidad
R2 ajustado
Log verosimilitud
Durbin Watson
Número Observaciones
-0,18
-1,07
0,29
1,93
4,46
0,00
-1,65
-3,07
0,00
0,94
-2,26
2,08
87
LOG(ORIGVIS)
OLS
1,91
0,95
0,34
-0,33
-2,50
0,01
0,60
7,60
0,00
0,03
0,27
0,79
-0,29
-2,80
0,01
-0,31
-1,50
0,14
1,13
2,31
0,02
-1,16
-1,88
0,06
0,83
-17,23
2,36
87
LOG(ORIGNOVIS)
OLS
1,89
0,96
0,34
-0,42
-3,10
0,00
0,27
2,80
0,01
-0,34
-2,56
0,01
-0,95
-6,10
0,00
-0,10
-0,49
0,63
1,88
3,84
0,00
-2,38
-3,46
0,00
0,94
-21,20
2,11
87
36
Origination Rate: Observed, Fitted and Forecasted
with and without Legal Instability
3,5%
Observado
Fitted Value
Proyectado sin IJ
Proyectado con IJ
3,0%
2,5%
2,0%
1,5%
1,0%
0,5%
0,0%
1995:05 1995:12 1996:07 1997:02 1997:09 1998:04 1998:11 1999:06 2000:01 2000:08 2001:03 2001:10 2002:05
37
Determinants of Delinquency Levels
Regresión
1
3
4
5
Niveles
2
Primeras
diferencias §
Niveles
Niveles
Niveles
6
Primeras
diferencias §
Constante
Estadístico t
0.007368***
2.97
0.052294***
21,38
0.007226***
2.91
0.006028***
2,43
-0.01189***
-13,06
0.00537***
-6,81
log(MORA(-1))
Estadístico t
0.899753***
7128.53
-0.29727***
-1156,9
0.899748***
7128.57
0.899755***
7128.70
0.898645***
7110,18
-0.29752***
-1152,8
AMORT
Estadístico t
0.028902***
95.56
0.003827***
12,14
0.028861***
95.42
0.028842***
95,36
0.026253***
86,72
0.005831***
19,95
BANCO
Estadístico t
-0.00944***
-43.45
-0.0027***
-14,14
-0.00940***
-43.26
-0.00944***
-43.42
-0.00718***
-32,91
-0.00236***
-11,48
VIS/NOVIS
Estadístico t
-0.01787***
-65.32
0.000523***
1,11
-0.01788***
-65.36
-0.01781***
-65.11
-0.01391***
-52,85
0.001739***
7,22
SALDOI
Estadístico t
-0.00811***
-49.65
-0.00005***
-1,35
-0.00817***
-49.99
-0.00811***
-49.65
-0.00250***
-22,87
0.000245**
2,33
TASA
Estadístico t
-0.08925**
-17.25
0.120914***
28,67
-0.08814***
-17.04
-0.07909**
-15.24
0.030782***
6,27
0.152744***
40,7
PLAZO
Estadístico t
-0.01872***
-40.64
-0.00962**
-23,01
-0.01884***
-40.91
-0.01887***
-40.96
-0.00017***
-48,6
-7.17E-06**
-2,12
LTV
Estadístico t
0.179184***
234.74
2.875096***
366,42
0.179501***
235,11
0.180415***
235.86
0.147596***
259,58
0.598189***
191,25
EDAD
Estadístico t
0.025317***
165.28
0.025492***
166,44
0.025621***
166,73
0.000680***
187,8
-0.02062***
-19,28
PRODIND
Estadístico t
-0.03091***
-27,23
-0.02534***
-22,93
-0.12541***
-24,69
-0.20100***
-37,18
-0.15654***
-29,88
0.001271***
5,94
0.004056***
17,2
0.005438***
23,33
0,80911
13885590
2,32
0,80911
13885590
2,31
0,80929
13885590
2,31
WMIN
Estadístico t
DUMMY 1999-2001
Estadístico t
0.001573***
7.38
R2 ajustado
0,80927
Observaciones Incluídas13885590
Durbin Watson
2,31
0.002487***
12.38
0,09082
13677431
1,87
0.004602***
21,04
0,09082
13677431
1,88
38
Months in Delinquency: Observed, Fitted y
Forecasted without Legal Instability
4,5
Fitted Value
4
Proyectado con IJ
Observado
3,5
3
2,5
2
1,5
1
0,5
Mar-02
Sep-01
Mar-01
Sep-00
Mar-00
Sep-99
Mar-99
Sep-98
Mar-98
Sep-97
Mar-97
Sep-96
Mar-96
Sep-95
Mar-95
Sep-94
0
Mar-94
Altura de Mora promedio (Meses)
5
39
Determinants of the Default Probability
Método: PROBIT BINARIO
Regresión
C
Probabilidad
Efecto marginal
DUM99
Probabilidad
Efecto marginal
DUM00
Probabilidad
Efecto marginal
DUM01
Probabilidad
Efecto marginal
VIS/NOVIS
Probabilidad
Efecto marginal
BANCO
Probabilidad
Efecto marginal
AMORT
Probabilidad
Efecto marginal
LOG(PLAZO)
Probabilidad
Efecto marginal
LOG(1+TASA)
Probabilidad
Efecto marginal
LOG(1+SALDOI)
Probabilidad
Efecto marginal
LOG(1+LTVORI)
Probabilidad
Efecto marginal
LOG(1+MORAPROM)
Probabilidad
Efecto marginal
LOG(1+GANCAP)
Probabilidad
Efecto marginal
Observaciones incluidas
R2 de Mcfadden
Log verosimilitud
Iteraciones hasta convergencia
1
-6,37
0,00
-0,31
-0,14
0,00
-0,01
-0,17
0,00
-0,01
-0,30
0,00
-0,01
0,43
0,00
0,02
4,71
0,00
0,23
0,25
0,00
0,01
1,36
0,00
0,07
0,64
0,00
0,03
-3,02
0,00
161.491
0,32
-15294
7
2
-7,87
0,00
-0,35
1,02
0,00
0,05
0,32
0,00
0,01
-1,26
0,00
-0,06
-0,10
0,00
0,00
-0,10
0,00
0,00
-0,36
0,00
-0,02
0,61
0,00
0,03
6,17
0,00
0,27
0,13
0,00
0,01
1,32
0,00
0,06
0,70
0,00
0,03
-3,47
0,00
-0,15
161.491
0,40
-13436
14
40
Marginal Effect Over the Default Probability
Incondicional
VIS/NOVIS
Vigencia del Crédito
1999
1999 y 2000
1999, 2000 y 2001
2,1%
0,1%
-0,7%
-0,7%
-10,8%
-5,7%
-6,6%
-0,7%
LOG(1+LTVORI)
0,0%
8,0%
10,1%
3,6%
LOG(PLAZO)
1,1%
1,1%
3,0%
0,6%
LOG(1+TASA)
39,0%
15,7%
31,0%
12,4%
LOG(1+SALDOI)
3,0%
1,4%
-0,4%
0,4%
LOG(1+GANCAP)
0
-28,5%
-28,5%
-9,7%
4,2%
4,7%
4,3%
2,6%
BANCO
LOG(1+MORAPROM)
41
Default Probability as a Function of
Original LTV
Probabilidad de entrega de BRP
8%
7%
6%
Vigentes en 1999 y 2000
5%
4%
3%
2%
NO VIS
VIS
1%
Incondicional
0%
4%
16%
28%
40%
52%
64%
LTV Original
76%
88%
100%
42
THE COSTS OF THE CRISIS
43
Financial Sector Bailout Cost
Capitalización banca pública (Efectivo + Bonos)
BCH
Banestado
Bancafé
CISA
Granahorrar
IFI
Banco Agrario
FES
Liquidación Caja Agraria
TOTAL CAPITALIZACIÓN BANCA PÚBLICA
Capitalización banca privada a cargo de accionistas
Resolución 06 de 1999
Resolución 06 de 2001
Bonos Fogafín corto y largo plazo
Resolución 06 de 1999
Resolución 06 de 2001
TOTAL CAPITALIZACIÓN BANCA PRIVADA
TOTAL CAPITALIZACIONES PÚBLICA Y PRIVADA
Apoyo a deudores hipotecarios
Subsidios de vivienda de interés social
Subsidio a la opción de readquisición
Capital semilla del FRECH
Reliquidación deudas hipotecarias
TOTAL APOYO A DEUDORES Y RELIQUIDACIÓN
TOTAL
Millions pesos
6.053.099
1.291.788
1.240.121
1.254.883
670.307
701.000
700.000
150.000
45.000
1.300.000
7.353.099
651.747
535.658
116.089
1.378.873
778.962
599.911
2.030.620
% GDP
3,20%
0,70%
0,70%
0,70%
0,40%
0,40%
0,40%
0,10%
0,00%
0,70%
3,90%
0,40%
0,30%
0,10%
0,70%
0,40%
0,30%
1,10%
9.383.719
600.000
150.000
100.000
350.000
2.563.602
3.163.602
12.547.321
5,00%
0,30%
0,10%
0,10%
0,20%
1,30%
1,60%
6,60%
44