Mortgage loans: an unexpected way out that could lower rates and increase supply
Mortgage lending in Argentina is experiencing a revival after nearly five years . The return of UVA (Purchasing Value Unit) adjustable mortgage lines , starting in mid-2024, has revived long-unmet demand among those who dreamed of owning their own home .
But beneath the enthusiasm lies a structural problem : in a financial system where the vast majority of deposits are very short-term, banks face a significant mismatch in granting loans for 20 or 30 years . The question is how to sustain this flow of credit without hitting that limit: a new proposal could hold the answer .
A recent report by economist Ramiro Moya, convened by the main banking associations (ADEBA, ABA and ABAPPRA), proposes a clear path: mortgage securitization .
What does this mean? Securitization—or securitization—allows banks to sell their mortgages to a financial trust, which in turn issues securities backed by those loans. It's a mechanism that transforms illiquid loans into tradable instruments in the capital market .
This model allows banks to provide loans and, once granted, share that responsibility with other investors through capital market instruments. This allows financial institutions to continue lending to more individuals and businesses , as they do not need to keep the entire loan on their balance sheets, which gives them the liquidity they need to continue operating.
What would be the benefit? For banks: they recover liquidity, reduce credit risk, and free up regulatory capital to continue lending. For investors, it offers access to inflation-adjusted assets with potentially more attractive returns than sovereign bonds.
The report notes that for the scheme to work in Argentina, anchor investors are needed. The Sustainability Guarantee Fund (FGS) could allocate part of its portfolio to these instruments, better matching its pension obligations. The Bank of Investment and Foreign Trade (BICE) could also play a central role, using its capital and its ties to international organizations to acquire these securities.
With the support of these stakeholders and the participation of insurers and mutual funds, Moya estimates that up to US$18 billion could be mobilized, financing more than 300,000 homes and bringing the mortgage stock to levels close to 6% of GDP (currently 0.2%).
This proposal comes amid an increasingly difficult-to-sustain mortgage loan supply . In recent months, banks have begun raising interest rates on their loans, making financing more expensive. And, as industry sources explain, there is no room to continue lending for 20 or 30 years with deposits that mature every 30 or 60 days .
However, in a proposal that seeks to go further, Pala Blockchain proposes complementing this vision of securitization with blockchain technology , stating that the traditional model, while viable, has structural limitations that prevent massive scalability and full integration . "Moya's proposal is a one-lane highway, and tokenization with blockchain is the key to transforming it into a 10-lane highway capable of supporting a much larger and more efficient flow of mortgage transactions," said Paula Vigliano, co-founder of the company.
The company's idea isn't to replace the current model, but rather to digitize everything from the purchase order to the final payment , encapsulating contracts, data, and traceability in auditable, legally-backed tokens . According to Paula Vigliano, they've already met with banking associations and explained the proposal technically and legally: "The banks are already talking about this, seeking a federal response so the entire country can articulate it." "If we manage to scale it, interest rates should drop, and access to housing could cease to be a privilege ."
They added: “ You don’t need new legislation, what we do is adapt the technology to the existing regulatory framework .”
The key change is at the source : the notarized digital testimony of the mortgage—with the same validity as the registered title—is encapsulated in a unique, immutable token. These tokens are pooled into a financial trust, which in turn issues new tokens representing tranches of debt. Each one can be traded on traditional markets or 24/7 platforms, with payments and events scheduled by smart contracts. Instead of the contract existing solely as a physical document or signed PDF, it is recorded on the blockchain .
Blockchain is, in short, a secure record, where everything is recorded in such a way that it cannot be altered, duplicated, or hacked without everyone's knowledge. By using it for mortgages, each loan is uniquely and unambiguously identified, regardless of the bank that originated it .
"It doesn't change the content of the contract, it changes where you register it. It already works with the current Civil and Commercial Code. All we do is encapsulate the mortgage in blockchain to ensure it's secure and traceable," summarizes Paula Vigliano.
The process begins with the notarized digital certificate of the mortgage, which has the same validity as the title registered in the property registry. This document is tokenized: it becomes a unique digital asset within the blockchain .
Banks, in turn, can pool many of these tokenized mortgages into a financial trust. Currently, these trusts can only be sold to local buyers. But if that same trust is tokenized, any investor anywhere in the world could buy a portion, just as they would buy stocks or bonds .
The result is a virtuous circle:
If banks could sell their tokenized mortgage portfolios to the global market, they would have more capital available to lend and could lower interest rates by reducing risk and diversifying investors.
“When you have a real asset against which to lend money, you have greater protection. And if you also secure it on the blockchain, you know exactly what you're buying. It's a language all banks understand: more security, more liquidity, more market,” Vigliano explained.
Who wins? According to the company, "everyone." Banks can rotate portfolios and release capital; investors receive real-time audits and reduce risks; the regulator receives regulatory compliance "embedded" in each token, with traceability and automatic AML/KYC controls; and end users could access more competitive and transparent credit.
“This is not a crypto fad or a financial marketing gimmick,” emphasized Rodolfo Vigliano. “In the United States, MERS reduced costs and time; in Germany, the Pfandbrief is synonymous with solidity; in Singapore and Switzerland, tokenized real estate is already being traded. In Argentina, the leap would be greater because we are addressing two chronic problems: the lack of document standardization and the inability to scale without increasing costs.”
The risks? The model is not without risks: defaults affecting subordinated tranches, prepayments that disrupt cash flows, lack of initial liquidity in the secondary market, or the need for legal protection to avoid challenges. But, according to Pala Blockchain, these are known problems with proven solutions.
Argentina, the fifth-largest blockchain hub in the world, has a unique opportunity to combine the solidity of the Civil Code with the efficiency of a robust digital infrastructure . The challenge is to move from paper to pilot, with inter-institutional agreements that allow for standardization of techniques and documentation.
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