GE Money on track to lend $150 mln in US-Mexico mortgages in 2007

MEXICO CITY (MarketWatch) -- GE Money, the financial services arm of General Electric Co. (GE), expects to lend about $150 million this year to U.S. residents who want mortgages to buy residential property in Mexico, a company official said.

"We closed (last year) with about $60 million of these loans. We are sure that this year we will do two-and-a-half times what we did last year," said Edwin Vega, chief executive of mortgage lender GE Money Credito Hipotecario, in an interview this week.

GE Money is keen to tap what it sees as a potential market worth billions of dollars that until recently has grown with little or no mortgage financing.

U.S. citizens have been purchasing homes in Mexican resort destinations like Los Cabos and retirement centers such as Guadalajara for decades, with home buyers paying in cash or obtaining expensive financing from real-estate developers and niche lenders.

Now large international lenders like GE Money and Spain's second-largest banking group Banco Bilbao Vizcaya Argentaria (BBV) want to leverage their presence in Mexico and the U.S. to bring more financing to this market.

Demographics are working in lenders' favor since about 78 million baby boomers will start retiring in the next decade and some will probably look to Mexico, where property prices haven't reached what some analysts have called stratospheric levels observed in popular retirement destinations in California and Florida.

The privatization of Mexico's airport industry and the emergence of low-cost carriers in recent years have also brought affordable air travel to new areas of the country, especially coastal destinations that are popular with home buyers from the U.S.

"There are a large number of people who are turning to Mexico, which they see as an attractive place to have a vacation home, a weekend house, and a retirement property," Vega said.

GE Money started piloting its "Mexican Dream Mortgage" program in five locations in late 2005, before moving to a full commercial launch the following year. Currently, the program is available in 12 locations, including the Baja California peninsula, Cancun, and the colonial city of San Miguel de Allende.

GE Money offers dollar-denominated adjustable-rate mortgages and fixed-rate mortgages for up to $1.5 million, although the average loan has been around $350,000.

The company's WMC Mortgage unit handles credit scoring and paperwork in the U.S. On the other side of the border GE Money Credito Hipotecario originates the loans, and GE Capital Bank provides the Mexican bank trust for foreigners who want to buy property on the coast or near the border.

During the first half of the year, GE Money plans to expand its product offering with a cash-out refinancing product that will allow citizens from the U.S. who already own property in Mexico to unlock the equity in their homes, and mortgages to buy homes under construction. To date, GE Money has only financed finished apartments and houses.

Mortgage financing will also allow Mexican real-estate developers to move their inventory faster and open up a much larger universe of potential clients.

"The developer collects his money faster and can move on to the next project. We are accelerating the cycle," Vega said.

The executive said the cross-border mortgage market is so new that GE Money and its competitors haven't yet started to fight over clients.

"I think the way things are right now, there is market for everyone. Something we have noticed in the domestic market is that more players in a growing market is good for everyone. It brings legitimacy to the product," Vega said.