Mortgage securitization can connect credit, savings, and investment to expand housing finance
A mortgage loan doesn't necessarily have to end up on a bank's balance sheet. Through mortgage securitization, a loan portfolio can be converted into marketable securities, connecting housing finance with long-term investors. The framework and precedents already exist in the Dominican Republic. The question is how much we can develop this market.
At the close of 2025, the financial system's mortgage portfolio reached RD$443.17 billion, representing a 13.2% year-on-year increase, according to the Superintendency of Banks. Even more importantly, its delinquency rate was a mere 0.73%, a testament to the quality of this credit segment.
Recycling capital
The logic behind securitization is relatively simple. An entity groups mortgage loans with certain characteristics and converts them, through a specialized structure, into securities that can be acquired by investors.
This allows some of the capital originally invested in mortgages to return to the financial system and be used to originate new loans. Mortgage lending thus ceases to depend exclusively on the balance sheet of the lender.
The Dominican Republic has already taken a first step. In December 2020, the country's first issuance of mortgage-backed securities took place, for RD$1,210.5 million. Institutional investors participated, including pension funds, investment funds, and insurance companies.
Long-term savings for long-term credit
This presents a significant opportunity. Mortgage loans are long-term obligations, and pension funds also manage resources with extended horizons. This overlap allows us to consider instruments that address both needs.
The low delinquency rate strengthens that argument. A 0.73% rate doesn't mean there's no risk, but it does indicate that a well-selected, diversified, and properly structured mortgage portfolio can offer a reasonable risk profile for institutional investors.
Therefore, allocating a portion of pension funds to mortgage-backed securities should not automatically be viewed as an imprudent investment. The analysis should focus on loan quality, diversification, collateral, risk rating, and management and collection mechanisms.
It's not an automatic solution
Securitizing mortgages doesn't mean interest rates will automatically fall or that unlimited credit will become available. For the mechanism to work, it requires high-quality loan portfolios, standardized documentation, sufficient scale, risk ratings, and transparent structures for investors.
Low default rates are a strength, but they shouldn't be used to relax controls. Precisely because the funds belong to the workers, any investment of pension funds must maintain strict criteria of security, diversification, and profitability.
Securitization does not replace banking; it complements it. The bank originates loans and knows the customer, while the stock market can provide an additional source of capital to keep that cycle going.
The Dominican Republic already has several pieces in place: a growing mortgage portfolio with low delinquency rates, institutional investors, an expanding stock market, and prior experience in securitization. The next step is not to invent the mechanism, but to refine it.
If we can prudently link long-term savings with a healthy mortgage portfolio, we can expand housing finance without concentrating all the capital and all the risk within the banking system.
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