SAVINGS AND LOAN SYSTEM

This final evaluation covers the period 3/75-10/79. It includes a summary of, and in fact is based in part on, a final joint (A.I.D./FINAVI) project evaluation meeting. As a result of the project, a Government of Honduras (GOH) savings and loan institution (FINAVI) was established, capable of providing: (1) a source of liquidity for savings and loan associations, (2) FHA-type mortgage insurance, and (3) supervisory and regulatory authority necessary for the planned and orderly growth of a savings and loan (S&L) and mortgage finance system. By 10/79, the value of mortgages purchased by FINAVI was 40% over the end of project (EOP) target. FINAVI"s capital, other than that provided by the project, was 300% greater than the EOP target. With regard to the S&Ls, the EOP targets had been exceeded by 336% for combined mortgage portfolio, l40% for the number of mortgages, and 2.5% for construction financing. FINAVI generated a small operation surplus in 1978. However, unless the ceiling on home mortgage interest rates is raised, FINAVI is unlikely to stay in the black. The Area Audit General criticized the Mission and FINAVI for not doing enough to encourage S&Ls to finance low-cost housing. As a result, FINAVI has begun to broaden its base to cover institutions other than S&Ls, such as the Federation of Housing Cooperatives which are more likely to serve lower-income groups. Five major recommendations were made: (l) that most of the Central Bank"s regulatory authority over S&Ls be transferred to FINAVI; (2) that the 20% reserve requirement be reduced to 10% on all deposits to free more savings for mortgage investments; (3) that the Central Bank remove the restriction calling for only 20% capital investment in one project; (4) that FINAVI divest itself of the Mortgage Life Insurance operation; and (5) that FINAVI obtain special authority to permit speedy foreclosure of FHA cases.