This is yet another in a series of interviews I’ve done with startup founders in Latin America. Today I’m talking with Juan Carlos Estrada-Torrescano and his brother, Ramon, who are co-founders of Hipos.com, which is sort of the “Lending Tree of Mexico,” i.e. a website making it easier for consumers to identify and select mortgage products from banks by shopping for the best deal. Incidentally, I first met Juan Carlos at #SWDF a few weeks ago!
LASB: Please tell us a little bit about the mortgage market in Mexico. How big is it?
Ramón (CEO and Founder): The housing industry is the main driver of the mortgage market in Mexico. This has been a direct consequence of having the housing industry as one of the motors for Mexico’s economy in the National Development Plan of the presidency of Felipe Calderón.
From 2007 to March 2012, according to the Federal Mortgage Agency (Sociedad Hipotecaria Federal, or SHF), there were 8.4 million mortgages related to housing. Just in 2011, there were 1.6 million mortgages totaling 251 billion pesos (19.5 billion USD). This would make an average loan of 160 thousand pesos (12 thousand USD).
The value of total mortgage loans held by private banks for housing and other uses in Mexico in 2011 was 412 billion pesos (32 billion USD). This has been a huge increase from the value in 2007 of 274 billion pesos (21 billion USD).
Juan Carlos (Cofounder): The private bank mortgage loan sector is quite consolidated. Around 96% of the total mortgage loan market is being held by 7 banks. We see a large opportunity for new entrants due to the market size and its constant growth rate.
LASB: What kind of growth rates do you see in the near future for the mortgage market?
Ramón: The mortgage market in Mexico has increased constantly since 2007 due to four main factors:
- Housing deficit of 9.0 million homes according to numbers provided by SHF
- Expected demographic growth of 600,000 families per year according to numbers provided by CONAPO (Consejo Nacional de Población)
- Government support to housing industry
- Macroeconomic stability
Juan Carlos: The total mortgage loans from private banks in Mexico, hipos.com major market segment, has increased 10.75% each year from 2007 to 2011 according to numbers provided by the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, or CNBV).
Juan Carlos and Ramon
LASB: How did you decide this was the company you wanted to build? How long have you been operating?
Ramón: Along with my partners, 4 years ago we bought our first mortgage brokerage franchise in Monterrey. Throughout different partnerships we currently own 2 more, in Guadalajara and Mexico City. My experience has demonstrated that when potential mortgage users approach a broker they have absolutely no idea where or how to initiate their search for a mortgage loan, nor do they know what a mortgage really is and its impact in the family economy.
That is where the idea of hipos.com came from, to create an online portal, specialized in mortgage financing, aiming to enhance and to increase the accessibility of credits.
The use of mortgage brokers is growing pretty fast and there is still no incumbent player online. According to Banco Santander, the mortgage origination of third-party brokers has increased from 30% of their portfolio in 2011 to 34% in the first six months of 2012.
Juan Carlos: With hipos.com, we aim to contribute to the democratization of knowledge in financial decisions, especially in mortgages.
There are plenty scattered Mexican websites with information about mortgages. Are they easy to read? Not really. Are they presented in a friendly way? Not at all. Clear information, first hand news of the mortgage ecosystem, and setting a new and peace of mind mortgage shopping dynamic, only hipos.com.
Frequently, people initiate their mortgage search by approaching the banks where they already have accounts. While bank employees may have some knowledge regarding credit cards, pensions and investment funds very infrequently do they know much about mortgages. Customers submit the necessary paper work and cross their fingers as they wait for the financial institution to authorize the credit. Most of the time the consumer believes that the financial institution is doing them a favor.
Another common situation is that the customer only initiates contact with the mortgage broker once they have already decided on the property that they wish to buy.
Ramón: We have being operating hipos.com with a beta version for one month now. We are asking friends and family to surf the website, to join our facebook fan page (https://www.facebook.com/Hiposcom), to follow us in Twitter (@hiposcom) and to let us know about their experience, feedback, and general comments.
In parallel we are beginning to offer hipos.com as a provider of information and mortgage advisory to large real estate developers and human resource departments in companies. By doing so we expect to get more visitors to our website and mortgages originated through us.
LASB: What have been the biggest challenges you have faced growing your company?
Ramón: The major challenge has been finding the right people, at the right moment, in order to build a great team in a short time. There has been two main issues related to people: the first one was that we had to outsource some of our core activities due to a lack of personnel (not recommended) and second we had to implement technical tests for our web designers to make sure they knew what their resumes stated.
Now we have the initial team ready, but it took us 5 months to find, to select and to have the proper people on board.
Juan Carlos: At this stage we are almost ready for launching hipos.com to the public and more money will be needed to marketing and PR activities. We see that finding the appropriate source of funding will be challenging. Hopefully most of the funding will come from a VC because we believe that experienced general partners and their contacts will make hipos.com growth at a higher rate than using government funding.
LASB: What advice would you give to other startup companies in Latin America as they begin their businesses?
Ramón: As a general rule my advice is to plan your steps and work with discipline to reach your milestones; but to listen to other people and to be flexible enough to adjust the plan as needed.
And know that in Latin America, due to informality and excessive politeness, when somebody says “yes” it could mean “no” so move fast, and a “no” rarely means “yes” so do not waste your time there.
Juan Carlos: Think of an idea, try it, try it again, and again and keep on trying… Believe in your product; believe in your quest. Do not assume it if you can confirm it. Be formal; be punctual. Be the best version of you, hold your breath, cross your fingers and enjoy the ride.
