ABOUT FONDO SOCIAL PARA LA VIVIENDA/SOCIAL HOUSING FUND EL SALVADOR

Fondo Social para la vivienda is supposed to be the biggest financial institution in respect to it´s market share of the mortgage market (29%). The FSV can be seen from many perspectives, one of which looks at it as a govermental financial institution that lost it´s objective of providing mortgages to the poor when it started to fund itself from the capital markets that forces the FSV to function as any other financial institution competing in the market and that needs risk ratings to obtain funds and function under a business perspective rather than a social perspective. The good side is that with this way of managing the fund, there is less risk of using it for populistic purposes that could result in it´s bankruptcy.

Even thou the institution functions financially independantly from goverment, investors of capital in the fund know that it has backing of goverment in case things go wrong. My personal opinion is that even thou the fund is managed as a business and by goverment, it´s investors, that are mainly bank conglomerates through pension funds, could have some sort of influence in the fsv as their money is the money that keeps the funds running. We should analyze the funds capital structure in the next paragraphs.

Loans in default and real estate owned of the FSV can reflect how vulnerable low income buyers are and also the bad quality of houses, services and neighborhoods in which most of the abandoned houses are located. This could lead us to analyze why people can´t buy more houses in our economic system and why people that abandon the houses they bought can´t keep paying them or why they don´t want to keep paying them.

It has been a positive sign from this goverment that before it, only loans up to $30,000 could be financed by the fund and now this has been expanded to houses up to $50,000. It is clear that this is very convenient to access votes of population that are beeing benefited by this measure and this could also help diversify risk in buyers that have more stability but could distract from the problem that less favored people have in obtaining and paying loans to buy houses.

Pension Funds are not obliged by law anymore to invest in the FSV so the institution needs to access different investor. 22.1% where loans in default to December of 2007, and local Banks have a 2.0% rate, which indicates that even thou this credits in default are covered by reserves, the FSV has a problem wih loans in default. Another interesting data is that 58.4% of Class A loans is serving as guarantee for emissions in the stock market. To December 2007 the FSV has
27,659 foreclosed houses in it´s balance sheets.