The Housing Sector at OPIC Debra Erb Overseas Private Investment Corporation

1. The Housing Sector at OPIC Debra Erb Overseas Private Investment Corporation National Association of Realtors International Forum May 19, 2006

2. Developmental Value of Housing Sector • Economic value of housing construction and all related activities – including SMEs • Social stability – community building • Property rights, poverty reduction • Capital markets – long term financial stability

3. OPIC objectives • Increase affordability of housing and access to housing for LOW and MIDDLE income families • Increase jobs • Skills transfer – better quality homes • Development of financial infrastructure • Encourage development of property rights framework

4. Realities of the markets • Lack of infrastructure (water, sewage, roads, power, phones, etc.) • It’s not just houses: need schools, health care, small retail, recreation areas etc. • Can’t build houses if families can’t buy • Varying levels of private property rights development and enforcement • Identifying qualified local partners

5. U.S. Value Added • Construction/project management expertise • Low cost materials, building methods • Quality technology (natural disaster) • Mortgage lending technology/expertise • Established capital markets infrastructure, investor base

6. Developers Construction firms Engineering firms Architects Raw materials Manufactured components Hard goods (plumbing, fixtures) Mortgage finance experts IT companies Mortgage Insurance Title insurance Investment banking services Pension funds Potential investors/participants

7. Identifying U.S. investors • OPIC role in encouraging, supporting investors (U.S. and foreign) is key • Strong interest from immigrant/citizens,but they often lack expertise • Trying to combine financial investors with U.S. services companies • Leverage capital markets access • Work with other U.S. agencies in outreach

8. Standard housing products • Construction/development: loans and political risk insurance • Primary market mortgages: loans to fund purchase of long term loans • Hybrid construction/installment sales contract • Long term warehouse loan: to “construct” MBS pools • Capital markets: PRI and financial guarantees for mortgage securities

9. OPIC Tools • Political risk insurance • Direct loans (SME;s only) • Unfunded guaranties (to U.S. beneficiary) • Capital markets funding – COPS program

10. NGO’sin the Housing Sector • Support the lowest income groups when governments cannot • Combine housing with other social development programs • Support projects that cannot produce normal commercial returns • Tend to be more community-based for informal sector

11. Constraints - Internal • Definition of U.S. eligibility – few U.S. banks involved in this industry in emerging markets • Dollar denominated programs – adds cost and risk, works against affordability goal (pending change) • Project finance model difficult to apply to capital markets programs • Fixed rate financing

12. Constraints - External • Limited legal framework for property rights, foreclosure, etc. • Limited credit infrastructure and limited experience with consumer debt • Macro-economic conditions • High costs vs low wages • Inflation • Political volatility and corruption • For MBS markets – small markets/demand

13. OPIC Recent Housing Experience 13

14. Brazil – housing development - $5m Kenya - $7mm loan, for construction and lease purchase program Uganda – housing construction - $5 m Ghana – mortgage program $30 m Zambia – mortgage program - $46 m Kenya – LIS and tax collection system $.84 m Nigeria - $4.4 for construction S, Africa – construction loan guaranty $5.6 m Pakistan – mortgage insurance facility guaranty Pipeline Highlights

15. Mexico and CAFTA • Resort worker housing program • Capital markets support for mortgages • Employer assisted housing • Land and infrastructure development