BRAZIL, 2025 — The Brazilian government and key players in the financial sector are growing increasingly concerned about mounting pressure on the country’s housing finance market. Amid high interest rates, a reduction in subsidized lending programs, and limited access to long-term capital, policymakers are now exploring capital market reforms as a strategic solution to revive mortgage lending.
Central to this discussion are plans to enhance securitization mechanisms, attract private investment, and make mortgage-backed securities more appealing to institutional investors. These measures aim to offset limited public funding while promoting a sustainable housing finance system that could restore access to homeownership for millions of Brazilians.
The Current Mortgage Landscape
According to Brazil’s Central Bank, new mortgage origination dropped by 18% in the first quarter of 2025 compared to the same period in 2024. The main reason: persistently high Selic base interest rates, which remained above 10% throughout 2024 and have only recently begun to ease—though still at levels that constrain borrowing.
Traditionally, a significant portion of the country’s mortgage market relied on Caixa Econômica Federal, a state-owned bank that issued subsidized loans under programs like Minha Casa Minha Vida and Casa Verde e Amarela. However, due to budget constraints and inflationary pressure, the federal government has cut back on subsidized financing, leaving many households unable to qualify for affordable loans.
A Turn Toward Capital Markets
Faced with these challenges, Brazil’s Ministry of Finance, the Central Bank, and the Securities and Exchange Commission (CVM) are working jointly to increase private capital involvement in the mortgage sector. Key initiatives under consideration include:
- Expanded mortgage securitization — promoting issuance of mortgage-backed securities (CRI — Certificados de Recebíveis Imobiliários) to attract institutional investors;
- Standardization and transparency — implementing uniform formats for mortgage-backed instruments and improving disclosure and risk assessment;
- Tax incentives — offering benefits to funds and individuals who invest in mortgage-backed securities;
- Secondary market development — laying the groundwork for a robust trading platform for mortgage securities, similar to Fannie Mae and Freddie Mac in the U.S.
Finance Minister Fernando Haddad stated, “We need to reengineer our financial architecture to mobilize long-term capital without overburdening public finances.”
The Role of Institutional Investors
At the heart of the strategy is attracting pension funds, insurance companies, and asset managers—entities that control vast pools of capital and seek stable, long-term returns. Yet many remain cautious, citing low liquidity in the mortgage-backed securities market, weak investor protections, and insufficient transparency.
To address these concerns, the CVM is preparing new regulations designed to bolster investor confidence, including:
- stricter risk disclosure requirements;
- standardized ratings for mortgage assets;
- the establishment of independent servicing firms to manage mortgage pools.
Additionally, the government is considering the creation of a national mortgage insurance fund—similar to systems in Canada and Germany—that would help de-risk investments.
Growth Potential for Mortgage-Backed Securities
According to ANBIMA (Brazilian Association of Financial and Capital Market Entities), the outstanding volume of CRIs reached 240 billion reais in 2024 (approx. €44 billion), but this represents less than 10% of Brazil’s total mortgage portfolio. By comparison, the share of securitized mortgages in the U.S. exceeds 60%.
Experts estimate that with proper reforms, the volume of tradable mortgage securities could surpass 600 billion reais (€110 billion) by 2030, providing a more diversified and resilient framework for housing finance.
Market and Industry Reaction
Banks and developers have cautiously welcomed the reform plans. Representatives from Banco Bradesco and Itaú Unibanco note that a mature secondary mortgage market would allow lenders to “reallocate risk and increase loan volumes without inflating their balance sheets.”
Real estate developers such as MRV Engenharia and Cyrela expect the reforms to speed up project approvals and reignite demand. Still, they stress the need for parallel improvements in urban planning and land accessibility, especially in Brazil’s largest cities.
Consumer rights groups, meanwhile, emphasize that capital market solutions must be paired with protective measures to prevent vulnerable households from becoming over-indebted. They advocate for continued interest rate oversight and regulatory safeguards.
Political and Economic Dimensions
The reform agenda touches on sensitive political ground and requires broad institutional support. Some lawmakers have voiced concern that increased reliance on private mortgage securitization could open the door to instability similar to the 2008 U.S. housing crash.
In response, the Central Bank stresses that Brazil’s model will incorporate global best practices, strong regulatory oversight, and phased implementation.
The government is also exploring partnerships with multilateral institutions such as the World Bank and CAF to assist in technical design and partial funding of market infrastructure.
Outlook and Risks
While analysts broadly support reform efforts, they caution that success depends on effective coordination and long-term policy commitment. Key risks include:
- Interest rate volatility, which could affect pricing and demand for mortgage assets;
- Low investor appetite due to limited financial literacy and unfamiliarity with mortgage-backed products;
- Regulatory fragmentation, requiring coordination among multiple agencies.
Nonetheless, researchers from Fundação Getulio Vargas argue that with proper governance, transparency, and public sector involvement as a guarantor, this initiative could mark a turning point in Brazil’s mortgage finance system.
Conclusion
In the face of fiscal constraints and growing housing demand, Brazil is turning to capital market innovation as a possible lifeline for its mortgage sector. With a strong regulatory foundation and increased participation from institutional investors, capital markets could provide a sustainable alternative to public subsidies.
If implemented effectively, the reform could not only revitalize mortgage lending but also catalyze long-term growth in the construction sector, financial markets, and the broader economy. Still, the outcome will depend on the speed, coordination, and precision of Brazil’s actions—making this a critical moment of opportunity and risk in equal measure.
