Brazil's Caixa to further limit mortgage loans amid funding dry-up

SAO PAULO: State-controlled Caixa Econômica Federal, Brazil's largest mortgage lender, plans to

further limit disbursements of home loans amid a severe reduction in outstanding savings deposits in Latin America's largest economy.

Starting Aug. 17, borrowers will be barred from taking more than one loan funded with savings deposits, a move aimed at preserving Caixa's depleting stock of savings deposits available

for housing credit, the Brasilia-based lender said in a statement on Wednesday.

Currently, homeowners with a mortgage loan at Caixa can apply for an additional one, should their disposable income levels permit it. In recent months, Caixa has imposed additional restrictions on certain types of loans in the wake of a steep decline in savings as unemployment soared.

"Caixa's focus this year will be on financing new homes, with a special dedication to low-income housing," the statement said.

The decision underscores the headwinds facing mortgage lenders as Brazil enters its steepest recession in 25 years.

Lending on the segment, which grew 40 percent annually between 2007 and 2014, might stall this year and next as rising interest rates weigh on real estate purchases.

The total amount of mortgage loans funded with money from Brazil's Savings and Loans System, or SBPE, reached 104.4 billion reais ($29 billion) in June, the lowest since at least 2003. In the first six months, disbursements of SBPE loans

slipped 16 percent, industry group Abecip said on Wednesday.

Caixa is struggling to cut dependence on savings deposits to fund home purchases. Last year, 60 percent of loans extended to homebuyers had savings deposits as their main source of funding.

Over the past year, rival state lender Banco do Brasil SA and private-sector peers such as Itaú Unibanco Holding SA are growing their mortgage loan book at a faster pace than any other segment, partly due to Caixa's retreat from the

segment. Caixa has slightly less than two-thirds of outstanding mortgage loans in Brazil, according to central bank data.