December 7, 2016 / 7:34 PM / a year ago

INTERVIEW-Brazil's MRV sees home sales cancellations halving

(Adds details in paragraphs 8-9)

By Ana Mano and Gabriela Mello

SAO PAULO, Dec 7 (Reuters) - MRV Engenharia SA expects to more than halve the number of failed home sales in coming months, a sign that efforts by Brazil’s No. 1 low-income homebuilder to toughen terms for potential buyers will soon bear fruit, co-Chief Executive Officer Eduardo Fischer said.

In a Wednesday interview, Fischer said MRV’s most widely used gauge of cancellations could fall to about 10 percent of sales from a ratio of 23 percent currently. He declined to give an exact time frame for the decline.

According to Fischer, MRV undertook a series of steps to curb a two-year surge in home cancellations across the industry. Some of them include booking a sale only after lenders approve terms of mortgage loans to homebuyers, which in theory makes it harder for clients to reverse their purchase, he said.

“By being more selective, MRV may have booked fewer gross sales but the net result is positive,” he said.

The situation underscores how efforts to stem deteriorating home market metrics are helping some homebuilders recover faster than others from a harsh recession, record unemployment and a credit crunch. MRV is up 29 percent this year, in line with a broader index grouping Brazil’s main homebuilding and property companies.

Shares of MRV shed 0.5 percent to 10.88 reais in late afternoon trading on Wednesday.

As the government tries to resuscitate Latin America’s largest economy and the central bank cuts interest rates, Belo Horizonte, Brazil-based MRV also expects launches of new projects to recover next year, Fischer said.

MRV will invest around 300 million reais ($88 million) next year to buy land that could potentially be developed across 22 Brazilian cities. With enough cash to grow organically, Fischer does not see a wave of industry mergers in the near future.

The mortgage financing issue for homebuilders is at the core of their balance sheet health, according to analysts. Typically, MRV finances up to 20 percent of a unit and the banks the remainder. As a result, any changes to the state-controlled FGTS worker severance fund could potentially be disruptive to MRV’s business, Fischer said.

The FGTS fund is one of the main sources of long-term funding for mortgages in Brazil.

Increased risk aversion among lenders during the current recession led to tighter mortgage credit supply. Still, state-controlled Caixa Econômica Federal, Brazil’s largest mortgage lender, has kept its appetite for disbursing new home loans, Fischer said. ($1 = 3.4032 reais) (Editing by Guillermo Parra-Bernal and Jonathan Oatis)

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