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Mexico builders crash as foreclosures climb

– Just as the U.S. emerges from the worst of its foreclosure crisis, Mexico’s is getting worse.

Home repossessions more than doubled last year to a record 43,853 from 2011, according to Infonavit, the state-backed lender responsible for about 70 percent of home loans in Mexico, as the past decade’s expansion in government-subsidized housing backfires and adds to a glut of empty homes weighing on the nation’s beleaguered builders.

Efforts to build thousands of properties on low-cost land beyond city limits has led to unpaid mortgages as workers shun commuting costs and return to urban living, according to the government. With abandoned homes mounting, Infonavit has ramped up home seizures by acting on unpaid taxes instead of delinquent loans, reducing its transaction time to about four months from more than two years, the lender said.

“We have a serious problem with unoccupied homes,” Eduardo Torres, an economist with the local unit of Banco Bilbao Vizcaya Argentaria, said by telephone from Mexico City. “They were built under the false premise that the housing deficit was so great that everything they built would be bought regardless of conditions. So people got their homes, but that didn’t resolve their needs when the homes were three hours from their jobs.”

Infonavit has been financing home purchases since the 1970s in part to help curb a housing deficit caused by population growth and properties in disrepair. The policy created windfalls for homebuilders, sparking a wave of initial public offerings and foreign bond sales over the past 10 years, with investors rushing to finance a government-backed industry that seemed shielded from economic swings.

Now the policy is fueling a housing downturn even as Latin America’s second-biggest economy enters its fourth straight year of expansion. Mexico probably will grow 3.5 percent this year, compared with a 3.1 percent rate in Brazil, the region’s biggest economy, according to Bloomberg surveys of economists.

The U.S. economy is forecast to grow by 1.9 percent as its housing market rebounds from a six-year slump and the pace of foreclosure filings slows to the lowest level since 2007. Shares of U.S. homebuilders have risen 12 percent this year and more than doubled since the end of 2011.

In contrast, Mexico’s builders are getting squeezed by the added supply from foreclosed homes, with the Mexico Habita Index of six builders plunging 36 percent this year. Urbi Desarrollos Urbanos SAB, the country’s third-largest builder, has dropped 61 percent and yields on its bonds due in 2022 reached a record 20.89 percent on March 25 from 10.61 percent at the end of last year.