ORGANIC LAW OF THE FEDERAL MORTGAGE SOCIETY

Published in the Official Gazette of the Federation on October 11, 2001.
Updated with reforms published in the same Gazette on June 24, 2002; August 1, 2005; June 22, 2006; August 20, 2008, and January 10, 2014.

ORGANIC LAW OF THE FEDERAL MORTGAGE SOCIETY

INDEX

Chapter One
Nature, Object, and Domicile

Chapter Two
Operations

Chapter Three
Social Capital

Chapter Four
Administration and Oversight

Chapter Four Bis
Regarding the Society's Participation in Insurance Institutions

Chapter Five
General Provisions

Transitory Articles

Statement of Motives

References

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ORGANIC LAW OF THE FEDERAL MORTGAGE SOCIETY

CHAPTER ONE

Nature, Object, and Domicile

(5) Article 1. This Law is regulatory of the fifth paragraph of Article 4 of the Constitution and aims to regulate the organization and functioning of Sociedad Hipotecaria Federal, Sociedad Nacional de Crédito, Development Banking Institution.

(7) Article 2. Sociedad Hipotecaria Federal, Sociedad Nacional de Crédito, shall aim to promote the development of primary and secondary housing credit markets, by granting loans and guarantees intended for the construction, acquisition, and improvement of housing, preferably of social interest in accordance with this Law, as well as for increasing productive capacity and technological development related to housing.

Likewise, it may guarantee financing related to the equipment of housing complexes.

(4) The Federal Mortgage Society will develop programs that promote the construction of housing in indigenous zones and communities within the national territory, using resources approved for such effect in the expenditure budget.

For the purposes of this Law, the secondary credit market shall be understood as all operations through which the sale of mortgage, fiduciary, or title portfolios issued with the guarantee of said portfolio to third parties is effected.

Article 3. The domicile of Sociedad Hipotecra Federal shall be that which, within the national territory, is determined by its Organic Regulations. The duration of the Society shall be indefinite.

CHAPTER TWO

Operations

Article 4. The Society may carry out the following acts:

I. Accept loans and credits;
II. Issue banking bonds;
III. Make deposits in credit institutions and financial entities abroad;
(5) IV. Operate with foreign currency and securities, including those backed by guarantees granted by the Society or insurance provided by insurers in which the latter participates; (5) V. Guarantee credits and securities related to housing financing, granted or issued by financial entities, and invest in such securities; (10) V Bis. Grant credits related to its object in order to promote the development of any segment of the primary and secondary housing credit markets or to ensure the stability of said markets in accordance with the criteria defined by its Board of Directors; (8) V Ter. Provide consulting services; (10) VI. Conclude contracts to cover, totally or partially, the risks assumed by the Society for the operations referred to in the preceding fractions V and V Bis;

VII. Promote schemes to constitute initial payments or down payments intended for the acquisition of housing;
VIII. Perform appraisals that shall have the same probative force as those assigned by law to public brokers or experts;
IX. Conduct trust operations and carry out mandates and commissions related to its purpose, when the law assigns this task to the Society; when it concerns acts that contribute to achieving its objective or when the Society itself establishes trusts to fulfill its labor obligations;
(5) X. Act as common representative of holders of credit titles representing housing financing; (6) X Bis. Make contributions to the establishment of insurance institutions for the lines of housing credit and financial guarantee, or invest in the social capital of such institutions, in accordance with Article 24 Bis of this Law; (10) X Ter. Invest, with prior authorization from the Ministry of Finance and Public Credit, in the social capital of companies that provide complementary or auxiliary services in the administration or realization of the Society's object, or make contributions for the establishment of such companies, in which case they shall not be considered state-owned entities and, therefore, shall not be subject to the provisions applicable to entities of the Federal Public Administration Parastatal, as well as contract their services without the Federal Law on Acquisitions, Leasing, and Services of the Public Sector being applicable for such effect; (11) X Quáter. Make the investments provided for in Articles 75, 88, and 89 of the Credit Institutions Law; (11) XI. Promote the implementation of complementary insurance programs for housing credits, which allow expanding risk coverage and facilitate the release of obligations, encumbrances, or limitations on ownership charged by the borrowers or their beneficiaries, when adverse economic conditions not attributable to them arise, which significantly affect their financial situation, in order to protect the borrowers' assets, and
XII. Other operations referred to in the Credit Institutions Law, as well as analogous and connected ones authorized by the Ministry of Finance and Public Credit.

(10) Article 5. The operations referred to in Article 4 must be contracted in terms consistent with achieving the Society's object and with the sound administration of its assets. For this purpose, the financing granted by the Society must have collateral and satisfy the criteria defined by its Board of Directors.

Article 6. The Ministry of Finance and Public Credit, as an exception to what is provided by Articles 48 of the Credit Institutions Law and 26 of the Bank of Mexico Law, shall determine through general provisions the characteristics of the active operations, passive operations that do not imply the collection of public resources, and services, except regarding trusts, mandates, and commissions, that the Society carries out to fulfill the objective and exercise the powers entrusted to it in its capacity as a development bank under this Law.

It corresponds to the Bank of Mexico, in accordance with its Law, to regulate through general provisions the characteristics of passive operations that imply the collection of public resources, trusts, mandates, and commissions, money market operations, as well as financial operations known as derivatives that the Society concludes.

Article 7. In the trust contracts concluded by the Society, it may act in the same transaction as trustee and as beneficiary. Likewise, it may conduct operations with the Society itself in the fulfillment of trusts, mandates, or commissions, provided they do not imply a conflict of interest.

Article 8. The total nominal amount of the issuance of participation certificates related to real estate assets intended for housing construction may be fixed through a report formulated by the Society, preceded by an appraisal it conducts on the trust assets subject to such issuance.

When formulating its report and fixing the total nominal amount of an issuance, the Society shall take as a basis the commercial value of the assets, and if they are amortizable certificates, it shall estimate a prudent safety margin for the investment of the corresponding holders based on this value. The report formulated by the Society shall be final.

(11) Article 8 Bis. The Federal Government shall at all times be liable for the passive operations contracted by Sociedad Hipotecaria Federal, Sociedad Nacional de Crédito, Development Banking Institution:

(11) I. With national natural or legal persons; and (11) II. With private, governmental, and intergovernmental foreign institutions.

CHAPTER THREE

Social Capital

Article 9. The Society's capital shall be represented by capital contribution certificates in sixty-six percent of series "A" and thirty-four percent of series "B". The nominal value of these titles shall be determined in its Organic Regulations.

Series "A" shall only be subscribed by the Federal Government; it shall be issued in a title that carries no coupons, which shall be non-transferable and under no circumstances may change its nature or rights conferred upon the Federal Government itself.

Series "B" may be subscribed by the Federal Government, by the governments of the federative entities and municipalities, and by Mexican natural and legal persons, adhering to what is provided by Article 33 of the Credit Institutions Law.

The Ministry of Finance and Public Credit may authorize which entities of the federal public administration, governments of the federative entities, and municipalities may acquire certificates of the aforementioned series "B" in a proportion greater than that established in Article 33 of the Credit Institutions Law.

Article 10. The net capital referred to in Article 50 of the Credit Institutions Law shall be that fixed by the Ministry of Finance and Public Credit, after hearing the opinion of the Bank of Mexico and the National Banking and Securities Commission.

Article 11. Under no circumstances may foreign natural or legal persons, nor Mexican companies whose statutes do not include a clause excluding direct and indirect foreigners, participate in any form in the Society's capital.

Persons who contravene the provisions of this article shall forfeit their participation to the Federal Government.

Article 12. The Ministry of Finance and Public Credit shall establish the form, proportions, and other conditions applicable to the subscription, holding, and circulation of series "B" certificates.

CHAPTER FOUR

Administration and Oversight

Article 13. The Society's administration shall be entrusted to a Board of Directors and a General Director, within their respective spheres of competence.

(10) Article 14. The Board of Directors shall be composed of ten counselors, distributed as follows:

(10) I. Six counselors shall represent series "A" of the Society's capital contribution certificates, who shall be:

(5) a) The Secretary of Finance and Public Credit, who shall preside over the Board of Directors; (10) b) The Undersecretary of Finance and Public Credit; (10) c) A Vice Governor of the Bank of Mexico, designated by the Governor himself; (10) d) A representative designated by the Governor of the Bank of Mexico within the 3 upper hierarchical levels of the central institute; (11) e) The Secretary of Agrarian, Territorial, and Urban Development, and (10) f) The Head of the National Housing Commission, and (5)

II. Four external counselors shall represent series "B" of the Society's capital contribution certificates; they shall be designated by the holder or holders of these certificates representing at least 51% of them, and in the event that the holder is the Federal Government, the corresponding designation shall be made by the Secretary of Finance and Public Credit.

(5) External counselors shall have no substitutes. The other designated counselors shall designate their substitutes, who must preferably have the level of General Director in the Centralized Federal Public Administration or its equivalent.

(11) In the absence of the Secretary of Finance and Public Credit, the Undersecretary of Finance and Public Credit shall have the status of President of the Board of Directors; in the absence of the latter, the substitute of the Secretary of Finance and Public Credit shall have the status of President, and in the absence of all the aforementioned, those designated by the present counselors from among the series "A" counselors.

(5) The Board of Directors may invite to its sessions persons whose activities are related to the topics to be discussed.

(10) Article 15. The Board of Directors shall meet at least quarterly and shall validly session with the attendance of at least six of its members, provided that among them there are two of the series "A" counselors of the capital contribution certificates and two external counselors.

Resolutions shall be taken by majority vote of the counselors present, with the President having a casting vote in case of a tie.

The agenda of the Board of Directors' sessions must list the matters to be discussed, excluding general matters.

(5) Article 16. The term of external counselors shall be four years. The terms of external counselors shall be staggered and succeed each other annually.

(5) Persons holding the position of external counselors may be designated for this role more than once.

(5) The vacancy arising in an external counselor position shall be filled by the new member designated to integrate the Board of Directors and shall last only for the time remaining to be served by the substitute.

(8) External counselors shall not be part of the Society's staff; therefore, they shall not be considered public servants.

(5) The Society's Board of Directors shall have the inalienable power to fix the remuneration of external counselors, upon proposal of the Committee referred to in Article 31 of this Law, without such remuneration being subject to authorization by any administrative authorities. To adopt the resolutions referred to in this paragraph, in the respective Board of Directors session, external counselors shall not participate, and it must consider the existing remuneration for the Society's staff, as well as the evolution of remuneration in the country's financial system. Furthermore, as a guiding criterion, the Board of Directors must ensure that the Society has competent and qualified external counselors, in accordance with applicable provisions and based on labor market conditions.

Payments shall be made from the Society's authorized budget.

(5) Article 17. The designation of external counselors must fall upon persons of Mexican nationality who have experience in financial, legal, administrative, or accounting matters, and with capacity and professional prestige that allow them to perform their functions free from conflicts of interest, not subordinate to personal, patrimonial, or economic interests. Additionally, they must meet the following requirements:

(7) I. Be in full enjoyment of their rights; (5) II. Have held, for at least five years, high-level positions in financial, legal, administrative, or accounting matters; (5) III. Not be a shareholder, official, proxy, or agent of a company dedicated to the construction, marketing, or financing of housing, or a relative in the first degree, by blood or affinity, of persons having any of the characteristics mentioned in this fraction; (5) IV. Not hold a position, job, or commission in public service on the day of designation; (6) V. Not have significant patrimonial links, pending litigation, professional links, labor ties, or conflicts of interest with the Society, nor with insurance institutions or companies in whose capital it participates; (6) VI. Not have, in any form, the representation of associations, guilds, federations, confederations of workers or employers, or sectors of attention related to the Society's object, insurance institutions, or companies in whose capital it participates, and (6) VII. Others determined by the Credit Institutions Law and other applicable provisions.

(5) External counselors must communicate to the Board of Directors any situation that could result in a conflict of interest, as well as abstain from participating in the respective deliberation and voting. Likewise, they must maintain absolute confidentiality regarding all acts, facts, or events of the Society, as well as insurance institutions or companies in whose social capital it participates, including the deliberations of the Board of Directors of which they are aware by virtue of their status as counselors, as long as such information has not been made public.

(6) For the purposes of this article, an external counselor shall be considered to have significant patrimonial links when, by themselves or through companies in whose social capital they participate, they make sales, equivalent to more than ten percent of the total annual sales of them or such companies, in the last two fiscal years, to the Society or to the companies referred to in fractions X Bis and X Ter of Article 4 of this Law.

(6) The Society's General Director and counselors must abstain from participating, representing the Society or insurance institutions in which it participates, in partisan political acts.

(5) Article 18. External counselors designated by the Head of the Ministry of Finance and Public Credit in accordance with Article 14, fraction II, of this Law may only be removed for any of the following causes:

I. Mental incapacity, as well as physical incapacity that prevents the correct exercise of their functions for more than six months;
(6) I Bis. Failing to meet or contravening the requirements established by this Law for their designation; (6) I Ter. Failing to attend, without justified cause as judged by the Board of Directors, thirty percent or more of the sessions convened in the same fiscal year; (5) II. Failing to comply with Board of Directors agreements or acting deliberately, in excess or defect of their powers, or in contravention of the provisions of this Law;
III. Using, for their own benefit or that of third parties, confidential information available by virtue of their position, as well as disclosing said information without the Board of Directors' authorization;
(6)
III Bis. Participating and voting in those deliberations in which there is a conflict of interest, in contravention of the provisions of Article 17 of this Law; (5) IV. Submitting to the consideration of the Board of Directors, knowingly, false or misleading information; (5) V. Making decisions contrary to what is provided by Article 5 of this Law, and (6) VI. For any other cause considered serious by the Board of Directors, through a resolution taken by at least seven of its members.

(6) The Society's Board of Directors, upon request by its President or at least three of its members, shall resolve on the existence of grounds for the removal of an external counselor. The resolution shall be formulated by agreement of the majority of its members, after granting the affected party the right to be heard, without the latter participating in the corresponding vote.

(6) Based on the Board of Directors' resolution, the designation of the new external counselor shall proceed in accordance with this Law.

(5) In addition to the removal grounds indicated in this provision, series "A" counselors and the General Director shall be removed from their positions when their liability is determined through a final resolution issued by a competent authority, by falling under any of the scenarios contained in the Federal Law on Administrative Responsibilities of Public Servants.

(6) The Society's General Director and the General Directors of the insurance institutions referred to in fraction X Bis of Article 4 of this Law may be removed from their positions when they fail to justify work plans and when unjustified financial losses are obtained, without prejudice to the responsibilities that may arise.

Article 19. The Board of Directors shall direct the Society in accordance with the provisions of Article 42 and other related articles of the Credit Institutions Law.

The Board may agree on the execution of operations inherent to the Society's object. The agreements it issues regarding the operations provided for in fractions VI and IX of Article 46 of the Credit Institutions Law must consider the proposals of the General Director.

Article 20. The following shall also be powers of the Board of Directors:

(5) I. Approve, upon proposal of the General Director, the general lines of its active, passive, and service operations, as well as the investments made by the Society, subject to the provisions of Articles 5 and 6 of this Law; (6) I Bis. Approve the Society's long-term work plans submitted to its consideration by the General Director;

(6) I. Approve, upon the proposal of the Human Resources and Institutional Development Committee and within the framework of applicable budgetary provisions, the remuneration of external board members, as well as of the external members of the Committees constituted under this Law;
II. Approve the annual activities report presented to it by the General Director;
(5) III. Approve the proposal for the Organic Regulations of the Society, as well as the specific programs and other internal regulations presented to it by the General Director, for submission to the consideration and, where applicable, issuance by the Ministry of Finance and Public Credit; (3) IV. Repealed.
(6) IV Bis. Resolve on matters submitted to its consideration by the Audit Committee; (7) V. Issue the norms and criteria to which the preparation and execution of the budget for current expenses and physical investment of the Society must adhere, as well as approve said budget and the modifications that may be made during the fiscal year, subject to the global annual amounts authorized for this purpose by the Ministry of Finance and Public Credit; (10) VI. Approve, upon the proposal of the Human Resources and Institutional Development Committee, in accordance with what is provided in Article 42, fraction XVIII of the Credit Institutions Law, the organizational structure, salary scales and benefits, salary policy and for the granting of extraordinary compensation for the fulfillment of goals subject to performance evaluation, taking into account the prevailing labor market conditions in the Mexican financial system; promotion and retirement policies; selection, recruitment and training guidelines; separation criteria; and the other economic and social security benefits established for the benefit of public servants working in the Society; (8) VII. Issue the norms and bases to be followed for the sale at market price of movable or immovable property received in payment or awarded to the Society and to insurance institutions in which the former participates in capital, without the General Law of National Assets nor the Law of Acquisitions, Leases and Services of the Public Sector being applicable to it; (8) VIII. Approve the objectives, guidelines and policies in matters of credit origination and administration, as well as establish, in accordance with fraction V Bis of Article 4 of this Law, the criteria for granting credits, which must include, at least:
(8) a) The characteristics to delimit the market segments that require development without inhibiting the participation of the private sector under conditions of healthy competition in these segments.
(8) b) The deadlines or goals to determine when the Society must conclude with the granting of credits to the respective market segment, for which it must consider that healthy competition practices have been developed and that there is sufficient and adequate participation of the private sector.
(10) c) The criteria to authorize the participation of the Society in the granting of credits during unusual circumstances in the markets, with the purpose of maintaining liquidity and healthy operation of the housing credit sector, and (10) IX. Establish prudential policies that set limits to the Society's exposure in its function as a liquidity provider to the market.
(12) X. Repealed.

Article 21. The General Director shall be appointed by the Federal Executive through the Ministry of Finance and Public Credit, and this appointment must fall upon a person of recognized honorability who has extensive knowledge and experience in the financial system and in administrative matters. This person must also meet the requirements established in Article 24 of the Credit Institutions Law.

Article 22. The General Director shall be in charge of the administration and legal representation of the Society, without prejudice to the powers corresponding to the Board of Directors. To this effect, they shall have the following powers and functions:
(7) I. In the exercise of their legal representation powers, they may celebrate or grant any kind of acts and documents inherent to the purpose of the Society. They will have the broadest powers to perform acts of ownership, administration, litigation and collection, even those that require special authorization according to other legal or regulatory provisions. In virtue of this and in an illustrative, not exhaustive manner, they may issue, endorse and negotiate credit instruments, file complaints and grant forgiveness, exercise and waive judicial actions, including in the amparo trial; commit to arbitration and settle, grant general and special powers with all the powers that belong to them, even those that require a special clause, substitute them, revoke them and grant substitution powers to attorneys, obtaining express authorization from the Board of Directors when it comes to granting general powers for acts of ownership. (8) They may also represent the Society when it acts as the Responsible Authority in the amparo trial; the head of the administrative unit in charge of the legal area of the Society; (11) I Bis. Inform the Ministry, prior to the authorization of the corresponding instances, of the operations that could be linked to the purpose of other development banking institutions;
II. Execute the agreements of the Board of Directors;
(7) II Bis. Formulate the long-term work plan of the Society of at least five years, to submit it for consideration to the Board of Directors, which includes financial, operational projections and strategies of the Institution. This strategic plan will be reviewed at least every three years or earlier if an adjustment is required; (8) II Bis 1. Formulate the annual work plan related to the strategy, as well as the progress and follow-up of the long-term plan to submit it for consideration to the Board of Directors in the first quarter of each year; (10) III. Act as an attorney-in-fact and as a general fiduciary delegate, as well as propose to the Board of Directors the appointment of public servants of the Society who hold positions with the two hierarchies immediately below their rank and present the license requests, as well as the resignations thereof; (8) III Bis. Issue certifications of records of the Society's files and determine which public servants of the Society have this power;
IV. Sign and publish the monthly balances of the Society in accordance with the bases agreed upon by the Board of Directors;
V. Administer the assets and business by concluding the Society's agreements and executing the acts required for its ordinary course;
VI. Be the link between the Society and the Federal Public Administration and with the Congress of the Union;
(10) VII. Decide on the designation and hiring of public servants of the Society, other than those indicated in Article 42 of the Credit Institutions Law, as well as the designation and removal of fiduciary delegates; administer the personnel as a whole, and establish and organize the offices of the institution;
VIII. Present to the Board of Directors the proposals for modification to the Organic Regulations;
IX. Fix, in accordance with the scales approved by the Board of Directors, the salaries of the personnel and approve the programs that must be applied for their training and coaching, and

(5) X. Those other duties entrusted to them by the Board of Directors or that correspond to them in accordance with this Law.
(10) Article 23. The oversight of the Society will be carried out by the bodies and in the terms indicated in the Credit Institutions Law and the general provisions issued by the National Banking and Securities Commission.
(12) Article 23 Bis.- Repealed.
(5) Article 24. The Board Members, the General Director and the fiduciary delegates of the Society and of the Insurance Institutions in which it participates in terms of fraction X Bis, of Article 4 of this Law, are only obliged to answer positions or give testimony in court on behalf of the Society or said institutions, when the positions and questions are formulated by means of an official letter, which they will answer in writing within the term set by the respective authorities. (6) FOURTH BIS CHAPTER (6) Of the Participation of the Society in Insurance Institutions (6) Article 24 Bis.- The participation of the Society in the social capital of the insurance institutions referred to in Article 4, fraction X Bis, of this Law can only be made in the entirety less one of the shares representing the capital of such institutions and, consequently, these will be majority state-owned companies. The remaining share will be subscribed by the Federal Government, through the Treasury of the Federation. (6) The investments referred to in this article will be deducted from the net capital of the Society. (6) Article 24 Ter.- The Society and each of the insurance institutions referred to in the previous Article 24 Bis shall be governed by the following:
(6) I. The Society shall be obliged to respond subsidiarily and unlimitedly, up to the amount of its equity, for the fulfillment of the obligations incumbent on the aforementioned insurance institutions; (6) II. The Society shall be obliged to respond unlimitedly, up to the amount of its equity, for the losses of each and every one of the insurance institutions in whose capital it participates, and (6) III. The insurance institutions shall not respond for the losses of the Society, nor for those of the other institutions in whose capital the latter participates. (6) For the purposes of this article, all obligations that the aforementioned insurance institutions subscribe or contract after the date on which, where applicable, the Society ceases to be the holder of the shares representing their capital, shall be excluded. (10) Article 24 Quater.- As an exception to what is provided in Article 29, fractions VII, VII Bis and VII Bis 2 of the General Law of Insurance and Mutual Societies, with respect to the boards of administration of the insurance institutions dealt with in this chapter, they shall be integrated by the same board members who make up the Board of Directors of the Society and shall have the powers established by the applicable regulations. The oversight of the society will be carried out by the bodies and in the terms indicated in the General Law of Insurance and Mutual Societies and the general provisions issued by the National Insurance and Bond Commission. (6) The general director of each insurance institution referred to in this article shall be appointed by the Society, by agreement of its Board of Directors, upon proposal of the Secretary of Finance and Public Credit. The appointment of the general director may fall on the General Director of the Society. (6) The insurance institutions in whose social capital the Society participates will rely on its administrative structure for the exercise of their functions, in terms of the applicable provisions.

(6) The operations that, in accordance with what is established by the General Law of Insurance and Mutual Societies, are carried out by the insurance institutions in whose capital the Society participates must be contracted in terms that are consistent with the objective of promoting the development of the primary and secondary housing credit markets and with the healthy administration of its assets.
FIFTH CHAPTER
General Provisions
Article 25. The Federal Executive, through the Ministry of Finance and Public Credit, may interpret for administrative purposes the provisions of this Law.
Article 26. The Credit Institutions Law, the Bank of Mexico Law, commercial legislation, banking and commercial usages and practices, as well as the Federal Civil Code, shall apply to the operations of the Society, supplementarily to this Law in the order in which they are mentioned.
Article 27. The fiscal year of the Society shall begin on January 1 and end on December 31 of each year. The Society shall be obliged to publish in the Official Gazette of the Federation the year-end balance sheet.
(1) Article 28. The Society shall formulate annually its financial programs, general budgets of expenses and investments, as well as its operational programs, in accordance with the guidelines, measures and mechanisms established for this purpose by the Ministry of Finance and Public Credit.
(2) It is the responsibility of the Ministry of Finance and Public Credit to coordinate, evaluate and oversee the performance of the Society, as well as to authorize the modalities in the allocation of resources, in accordance with Article 31 of the Credit Institutions Law.
(2) The best use and most appropriate channeling of the Society's resources will be sought within the framework of the management autonomy required for its effective functioning in accordance with the applicable legal provisions.
(7) Article 29. For the purposes of what is provided in fractions V and V Bis of Article 4 of this Law, financial entities shall be understood as multiple banking institutions, development banking institutions, insurance institutions, limited-object financial companies, multiple-object financial companies, financial lessors, financial factoring companies, credit unions, savings and loan cooperative societies, popular financial societies, as well as savings and loan societies, which are operating under the transitional regime established in the "Decree by which various provisions of the Popular Savings and Credit Law are reformed and added", published in the Official Gazette of the Federation on May 27, 2005 and which, in terms of said Decree, have presented their file to the National Banking and Securities Commission to operate as a Popular Savings and Credit Entity, whether acting on their own behalf or, where applicable, as a fiduciary, as well as economic promotion trusts that have the guarantee of the Federal Government in the operation in question. (7) The Board of Directors may determine other persons who may be considered as financial entities, which shall be included in the circumstances of the previous paragraph.
Article 30. The operations of the Society may be recorded in a private document that, without further formality, must be registered by those in charge of the corresponding public registries, in accordance with Article 66 of the Credit Institutions Law. The constitution of guarantees must be subject to the formalities established by the applicable legislation.
(10) Article 31. The Society shall have a Human Resources and Institutional Development Committee, which shall be integrated as follows: three representatives of the Ministry of Finance and Public Credit, who shall be the Undersecretary of Expenditures, the Undersecretary of Finance and Public Credit and the Head of the Development Banking Unit; one of the external board members of the Society, appointed by its Board of Directors; a person outside the Society who, due to their knowledge and professional development, has extensive experience in the human resources area and who shall be appointed by said Board of Directors, upon proposal of the General Director of the Society, as well as the General Director of the Society. The decisions of said Committee shall be taken by majority vote. The Undersecretary of Finance and Public Credit shall serve as president of the Committee and shall have a casting vote in case of a tie. The Committee shall have a technical secretary, who shall have the right to speak but not to vote. (10) The General Director shall abstain from participating in Committee sessions that have the purpose of issuing opinions or recommendations regarding their salary, economic benefits and social security. (10) The Committee shall meet as many times as necessary at the request of its president, the General Director of the Society or the external board members. Whoever requests to hold a Committee session must request the technical secretary to issue the respective call to the members thereof, which must be accompanied by the agenda, as well as the place and date for the holding of said session. (10) This Committee shall advise and propose, the salary scales and benefits, salary policy and for the granting of extraordinary compensation for the fulfillment of goals subject to performance evaluation; promotion, advancement and retirement policies; selection, recruitment and training guidelines; separation criteria; and the other economic and social security benefits established for the benefit of public servants working in the Society. (10) The Ministry of Finance and Public Credit shall establish criteria in matters of occupational structure, salary movements, extraordinary compensation and benefits, which must be observed by the Committee. Likewise, the Society shall provide the Ministry and Undersecretariat indicated with the information they request. (10) Except for the external board member and the person appointed by the Board of Directors in terms of the first paragraph of this article, the other members of the Committee shall have their respective substitutes, who shall preferably be public servants at the immediate next lower level than the holders and must have, at least, the level of general director in the Centralized Federal Public Administration, or its equivalent. (10) In the event of the absence of the Undersecretary of Finance and Public Credit, without prejudice to the voting right of their substitute, the Head of the
Development Banking Unit shall preside over the Committee and exercise the casting vote. (3) Article 32. Repealed. (10) Article 33.- The Society shall provide legal assistance and defense services to the members of its Board of Directors, committees established by the same or provided for by regulatory provision and to public servants who work or have worked in the institution itself or in the insurance institutions in whose capital it participates, with respect to the acts that the aforementioned persons carry out in the exercise of the functions entrusted to them by law and in accordance with the guidelines issued for this purpose by the Ministry of Finance and Public Credit. (10) The aforementioned legal assistance and defense shall be provided even when the indicated persons cease to perform their functions or provide their services, as appropriate to the Society or the insurance institutions, provided that they are acts carried out in the performance of their functions or activities in service of the Society or the insurance institutions. (10) Legal assistance and defense shall be provided from the resources available to the Society for these purposes, in which the scenario must be foreseen that if the competent authority issues a final resolution against the subject of legal assistance that becomes final against them, said subject must reimburse the Society for the expenses and any other disbursements incurred in connection with the legal assistance and defense. (10) What is provided in this article shall apply without prejudice to the obligation that subjects of legal assistance and defense have to provide the reports required of them in terms of the applicable legal provisions as part of the performance of their functions.

TRANSITIONAL PROVISIONS
(Decree issuing the Organic Law of the Federal Mortgage Society, published in the Official Journal of the Federation on October 11, 2001) FIRST. This Decree shall enter into force the day following its publication in the Official Journal of the Federation.
SECOND. The Federal Mortgage Society shall be substitute trustee of the Housing Banking Operation and Financing Fund, starting from the day its Board of Directors holds its first session. The Federal Government, through the Ministry of Finance and Public Credit, guarantees the obligations of said Fund derived from financing operations contracted prior to the entry into force of this Decree.
The Federal Government grants additional guarantees to said Fund, for the continuation of its operating guarantee programs, up to six billion investment units, so that said Fund can absorb extraordinary losses that may arise in excess of reserves, which cannot be withdrawn and must be used at all times to cover contingencies backing such programs. To this effect, the Fund must keep the Ministry of Finance and Public Credit informed about the evolution of said reserves. (1) The Federal Government will respond at all times for the obligations that the Society incurs with third parties until the conclusion of said commitments. (12) Fourth paragraph.- Repealed. THIRD. The registrations and marginal annotations of any nature carried out in the Public Registries of Property and Commerce, as well as any other Registry, relative to the Bank of Mexico in its capacity as trustee of the Housing Banking Operation and Financing Fund, regarding real estate, contracts, agreements, credit instruments, commercial commissions, and any others, shall be understood as referring to the Federal Mortgage Society, starting from when it acts as substitute trustee of said Fund, according to what is provided in the second transitional article of this Decree. Likewise, actions, exceptions, defenses, and resources of any nature brought in lawsuits and administrative proceedings in which the Bank of Mexico, in its capacity as trustee of said Fund, has been a party, shall belong to the Federal Mortgage Society, starting from the date referred to in the previous paragraph. FOURTH. Upon the entry into force of this Decree, the amount of ten billion pesos shall be transferred from the Housing Banking Operation and Financing Fund to the Federal Mortgage Society, to integrate the social capital of the latter. Movable and immovable property transferred from the Bank of Mexico in its capacity as trustee of said Fund to the Federal Mortgage Society, in accordance with the second transitional article, shall also be considered part of said capital. FIFTH. The first fiscal year of the Federal Mortgage Society shall end on December 31, 2001. SIXTH. The Organizational Regulation of the Federal Mortgage Society must be issued within a period not exceeding 180 calendar days, counted from the date of entry into force of this Decree. SEVENTH. Persons who provide personal subordinate service to the Bank of Mexico, in its capacity as trustee in the Housing Banking Operation and Financing Fund, as well as officials holding any position in this trust, shall become part of the personnel serving the Federal Mortgage Society and will retain the remuneration and benefits they enjoyed upon the entry into force of this Law. Personnel entering work at the Federal Mortgage Society after the entry into force of this Law shall be subject to the provisions herein.

EIGHTH. The Federal Mortgage Society shall not distribute dividends nor reduce its capital, for a period of twelve years counted from the entry into force of this Law, except in the case where its Board of Directors, with the favorable opinion of two reputable rating agencies, considers that the Society has sufficient capital and reserves to meet all its obligations and contingent liabilities, as well as its financing and guarantee programs. (9) NINTH. Repealed. TENTH. Prior to the start of operations, other than those currently performed by the Housing Banking Operation and Financing Fund, the Federal Mortgage Society shall submit to the approval of the National Banking and Securities Commission, its operational systems, information processing systems, and internal control systems, as well as its organization and operation manuals. ELEVENTH. Provisions that oppose this Law are repealed. Mexico, D.F., September 25, 2001.- Dip. Beatriz Paredes Rangel, President.- Sen. Diego Fernández de Cevallos Ramos, President.- Dip. Martha Silvia Sánchez González, Secretary.- Sen. Sara Isabel Castellanos Cortés, Secretary.- Signatures." In compliance with what is established in fraction I of Article 89 of the Political Constitution of the United Mexican States, and for its proper publication and observance, I issue this Decree at the Residence of the Federal Executive Power, in Mexico City, Federal District, on the ninth day of the month of October of two thousand one.- Vicente Fox Quesada.- Signature.- The Secretary of the Interior, Santiago Creel Miranda.- Signature. TRANSITIONAL PROVISIONS Decree reforming, adding, and repealing various provisions of the Law of Credit Institutions; the Organic Law of Nacional Financiera; the Organic Law of the National Foreign Trade Bank; the Organic Law of the National Bank of Public Works and Services; the Organic Law of the National Bank of the Army, Air Force and Navy; the Organic Law of the National Savings Bank and Financial Services; and the Organic Law of the Federal Mortgage Society, published in the Official Journal of the Federation on June 24, 2002.
ARTICLE FIRST.- This Decree shall enter into force the day following its publication in the Official Journal of the Federation.
ARTICLE SECOND.- The Ministry of Finance and Public Credit shall make known the rules to determine the quotas referred to in article 55 bis of the Law of Credit Institutions, as well as the investment regime of trusts, which development banking institutions must establish within the following ninety calendar days counted from the entry into force of this Decree.
ARTICLE THIRD.- Development banking institutions shall be subject to the General Working Conditions in force, until new ones are issued and enter into force.
ARTICLE FOURTH.- All provisions that oppose the laws reformed, added, and repealed in this Decree are repealed.
ARTICLE FIFTH.- Procedures that had started prior to the entry into force of this Decree, in accordance with the laws reformed, added, and repealed, shall continue to be governed by the provisions in force on the date of publication of this Decree.
ARTICLE SIXTH.- The committee for human resources planning and institutional development must be integrated and begin functioning within a period not exceeding ninety calendar days counted from the date this Decree enters into force.

ARTICLE SEVENTH.- The comprehensive risk management committee must be integrated and begin functioning within 60 business days following the date this Decree enters into force.
ARTICLE EIGHTH.- With respect to the modification to article 7 of the Organic Law of Nacional Financiera, references contained in legal instruments where it states that deposits of titles, securities, or cash sums that must be made by or before the administrative or judicial authorities of the Federation or by or before the administrative authorities of the Federal District, as well as cash sums, titles, or securities seized by the judicial or administrative authorities of the Federation and those seized by the administrative authorities of the Federal District, shall be constituted in Nacional Financiera, National Credit Society, shall be understood as meaning that they may be constituted in national credit societies, development banking institutions authorized by law for such effect.
ARTICLE NINTH.- The State and National Advisory Councils referred to in articles 33 and 34 of the Organic Law of the National Bank of Public Works and Services must be integrated and begin functioning within 180 calendar days following the date this Decree enters into force.
Mexico, D.F., April 30, 2002.- Dip. Beatriz Elena Paredes Rangel, President.- Sen. Diego Fernández de Cevallos Ramos, President.- Dip. Adrián Rivera Pérez, Secretary.- Sen. Sara Isabel Castellanos Cortés, Secretary.- Signatures."
In compliance with what is established in fraction I of Article 89 of the Political Constitution of the United Mexican States, and for its proper publication and observance, I issue this Decree at the Residence of the Federal Executive Power, in Mexico City, Federal District, on the twenty-first day of the month of June of two thousand two.- Vicente Fox Quesada.- Signature.- The Secretary of the Interior, Santiago Creel Miranda.- Signature. TRANSITIONAL PROVISIONS (Decree reforming and adding various articles of the organic laws of development banking, published in the Official Journal of the Federation on August 1, 2005) FIRST.- This Decree shall enter into force the day following its publication in the Official Journal of the Federation. SECOND.- Provisions that contravene the provisions of this Decree upon its entry into force are nullified. Mexico, D.F., April 26, 2005.- Dip. Manlio Fabio Beltrones Rivera, President.- Sen. Diego Fernández de Cevallos Ramos, President.- Dip. Marcos Morales Torres, Secretary.- Sen. Sara I. Castellanos Cortés, Secretary.- Signatures." In compliance with what is established in fraction I of Article 89 of the Political Constitution of the United Mexican States, and for its proper publication and observance, I issue this Decree at the Residence of the Federal Executive Power, in Mexico City, Federal District, on the thirty-first day of the month of May of two thousand five.- Vicente Fox Quesada.- Signature.- The Secretary of the Interior, Santiago Creel Miranda.- Signature. TRANSITIONAL PROVISIONS (Decree reforming and adding various provisions of the Organic Law of the Federal Mortgage Society and the Value Added Tax Law, published in the Official Journal of the Federation on June 22, 2006) FIRST.- This Decree shall enter into force the day following its publication in the Official Journal of the Federation.

SECOND.- The term of the first external councilors designated in accordance with what is established in fraction II of article 14 of this Law shall last until December 31, 2006. The terms of external councilors whose appointments are made upon conclusion of the aforementioned term shall expire on December 31, 2009, 2010, 2011, and 2012, and the Secretary of Finance and Public Credit, when making the corresponding designation, shall indicate which of the cited terms corresponds to each councilor. THIRD.- Within 90 days following the designation by the Secretary of Finance and Public Credit of the external councilors in accordance with what is provided by the preceding transitional article, the composition of the Audit Committees and Human Resources and Institutional Development Committees referred to in articles 23 and 31 of this Law must be modified. FOURTH.- The Federal Government's guarantee regarding the obligations of the Society referred to in paragraphs three and four of article two transitional of the Organic Law of the Federal Mortgage Society, in the terms reformed and added according to the "Decree reforming, adding, and repealing various provisions of the Law of Credit Institutions; the Organic Law of Nacional Financiera; the Organic Law of the National Foreign Trade Bank; the Organic Law of the National Bank of Public Works and Services; the Organic Law of the National Bank of the Army, Air Force and Navy; the Organic Law of the National Savings Bank and Financial Services; and the Organic Law of the Federal Mortgage Society", published in the Official Journal of the Federation on June 24, 2002 and clarified via errata published in the same medium on July 8, 2002, shall be applicable to those obligations assumed by the Society under fractions I and II of article 24 Ter, which is added to the Organic Law of the Federal Mortgage Society by virtue of this Decree. FIFTH. Any liability assumed by the Housing Banking Operation and Financing Fund to meet obligations contracted prior to the entry into force of the "Decree issuing the Organic Law of the Federal Mortgage Society", published in the Official Journal of the Federation on October 11, 2001, shall continue to benefit from the Federal Government Guarantee, under the same terms established in the first paragraph of article two transitional of said Decree. Mexico, D.F., April 27, 2006.- Dip. Marcela González Salas P., President.- Sen. Enrique Jackson Ramírez, President.- Dip. Marcos Morales Torres, Secretary.- Sen. Sara I. Castellanos Cortés, Secretary.- Signatures." In compliance with what is established in fraction I of Article 89 of the Political Constitution of the United Mexican States, and for its proper publication and observance, I issue this Decree at the Residence of the Federal Executive Power, in Mexico City, Federal District, on the sixteenth day of the month of June of two thousand six.- Vicente Fox Quesada.- Signature.- The Secretary of the Interior, Carlos María Abascal
Carranza.- Signature. TRANSITIONAL PROVISION (Decree reforming and adding various provisions of the Organic Law of the Federal Mortgage Society and repealing article nine transitional of the Decree by which the Organic Law of the Federal Mortgage Society was issued, published in the Official Journal of the Federation on October 11, 2001, published in the same Journal on August 20, 2008) Sole Article.- This Decree shall enter into force the day following its publication in the Official Journal of the Federation. Mexico, D.F., April 30, 2008.- Sen. Santiago Creel Miranda, President.- Dip. Ruth Zavaleta Salgado, President.- Sen. Gabino Cué Monteagudo, Secretary.- Dip. Jacinto Gomez Pasillas, Secretary.- Signatures." In compliance with what is established in fraction I of Article 89 of the Political Constitution of the United Mexican States, and for its proper publication and observance, I issue this Decree at the Residence of the Federal Executive Power, in Mexico City, Federal District, on August nineteen of two thousand eight.- Felipe de Jesús Calderón Hinojosa.- Signature.- The Secretary of the Interior, Juan Camilo Mouriño Terrazo.- Signature. TRANSITIONAL PROVISIONS (Decree reforming, adding, and repealing various provisions in financial matters and issuing the Law to Regulate Financial Groups, published in the Official Journal of the Federation on January 10, 2014)
ARTICLE TWENTY-FIRST.- Regarding the modifications referred to in Articles Eleventh, Twelfth, Thirteenth, Fourteenth, Fifteenth, Sixteenth, Seventeenth, Eighteenth, Nineteenth, and Twentieth of this Decree, the following shall apply:
I. The Congress of the Union, when issuing the regulatory laws referred to in the second paragraph of article two transitional of the Decree reforming, adding, and repealing various provisions of the Organic Law of the Federal Public Administration, published in the Official Journal of the Federation on January 2, 2013, shall provide for a special control and evaluation system for development banking institutions that is consistent with their nature and functions, avoids duplication of supervision mechanisms, and contributes to the efficiency of said institutions.
II. From the entry into force of this Decree, trusted workers of development banking institutions shall be excluded from the application of the general working conditions of the respective institution. Without prejudice to the foregoing, the acquired rights of trusted workers employed in a development banking institution on the date of entry into force of this Decree must be respected, with appropriate provisions in the remuneration and retirement manuals referred to in article 43 Bis of the Law of Credit Institutions, reformed in the terms of this Decree.
III. Within sixty calendar days following the entry into force of this Decree, national credit societies must extinguish the trust constituted in accordance with article 55 Bis of the Law of Credit Institutions.
IV. The social banking functions provided for in the reform to article 3 of the Organic Law of the National Savings Bank and Financial Services must be implemented by the institution starting January 1, 2014; therefore, the FEDERAL EXPENDITURE BUDGET FOR THE FISCAL YEAR 2014 must provide for resource allocation to strengthen the patrimony of the National Savings Bank and Financial Services so that it can fulfill its purpose as Social Banking.
V. Within ninety calendar days, the Ministry of Finance and Public Credit shall conduct an evaluation of subsidies, support, programs, funds, and trusts granted and administered by entities of the Federal Public Administration, with the aim of diagnosing the feasibility of channeling them through a new single system for agricultural and rural financing and promotion.
VI. When this or other decrees, codes, laws, regulations, or legal instruments issued prior to this Decree, as well as all contracts, agreements, and other legal acts celebrated by the institution, refer to Rural Financial Institution, it shall be understood that they refer to the National Agricultural, Rural, Forestry, and Fisheries Development Financial Institution.
TRANSITIONAL PROVISION OF THE DECREE
(Decree reforming, adding, and repealing various provisions in financial matters and issuing the Law to Regulate Financial Groups, published in the Official Journal of the Federation on January 10, 2014) SOLE ARTICLE. This Decree shall enter into force the day following its publication in the Official Journal of the Federation, except for what is provided in ARTICLES TWENTY-FIFTH, fraction I; THIRTIETH, fractions IV and VI; FORTIETH, fractions I and II; and FIFTIETH, fractions I and II, which shall enter into force on the dates established in said provisions. Mexico, D.F., November 26, 2013.- Dip. Ricardo Anaya Cortes, President.- Sen. Raúl Cervantes Andrade, President.- Dip. Javier Orozco Gomez, Secretary.- Sen. María Elena Barrera Tapia, Secretary.- Signatures." In compliance with what is established in fraction I of Article 89 of the Political Constitution of the United Mexican States, and for its proper publication and observance, I issue this Decree at the Residence of the Federal Executive Power, in Mexico City, Federal District, on January nine of two thousand fourteen.- Enrique Peña Nieto.- Signature.- The Secretary of the Interior, Miguel Ángel Osorio Chong.- Signature.

EXPOSICION DE MOTIVOS
(Decree of October 11, 2001)
Taking into account the impact that housing has on national development, insofar as it satisfies one of the most important needs of the family and its construction generates very favorable effects on the demand for labor and the inputs required for its production, this initiative proposes the creation of Nacional Hipotecaria, whose fundamental objective would be to promote, through the granting of credits and guarantees, the construction and acquisition of housing, preferably of social interest, as well as the securitization of mortgage portfolios generated by financial intermediaries, with the purpose of joining a broad and well-coordinated effort that allows significantly increasing the supply of housing available to salaried and non-salaried workers, the latter sector not attended to by the main public entities dedicated to housing financing. To this end, and considering, on the one hand, the convenience of avoiding the proliferation of public entities and, on the other, the desire to separate from the Central Bank the housing financing functions that it currently performs through the Fund for Banking Operation and Financing for Housing (FOVI), following the intention embodied in the original text of the tenth transitory article of the current Law of the Bank of Mexico; it is proposed that the social capital of Nacional Hipotecaria be integrated with part of the resources currently available to FOVI, without prejudice to the fact that it continues to operate, at least until its current operations expire, but under the coordination of the new Society, which would assume the role of substitute trustee, so that by uniting under the same direction the actions of both entities, a more effective contribution to the achievement of the purposes stated in the preceding paragraphs is reached. Consequently, so as not to demand additional budgetary resources for the constitution of the Society, the fourth transitory article provides that the Federal Government takes from the resources currently available in the patrimony of FOVI, those necessary to constitute the social capital of Nacional Hipotecaria. In the event that that Sovereignty approves it, Nacional Hipotecaria would have a legal nature and capital structure equal to that currently held by development banks, that is, its social capital would be represented by series A contribution certificates in sixty-six percent (66%), which could only be subscribed by the Federal Government; and series B by the remaining thirty-four percent (34%), which could be acquired by entities of the federal public administration, by governments of the federative entities and municipalities, and by Mexican individuals or corporations. The net capital of the Society would be determined by the Secretariat of Finance and Public Credit, hearing the opinion of the Bank of Mexico and the National Banking and Securities Commission. Among the operations that Nacional Hipotecaria is proposed to carry out, the following are
included:
a) The issuance of serial titles, to be acquired by the investing public directly from the Society or through the securities market; b) Receive loans and credits from the Federal Government and credit institutions; c) Take credits from abroad, including from international organizations; d) Operate in the secondary mortgage market, through the acquisition of these and their securitization; e) Grant guarantees to investors regarding the timely payment of issuances of titles backed by mortgages securitized by third parties; f) The granting of guarantees on credits with mortgage or fiduciary guarantee, in the case of default by debtors; g) Capacity to act as trustee of trusts that, if applicable, are decided to be constituted for the achievement of purposes directly related to the operations of the Society, as well as the capacity to administer programs that grant federal subsidies in favor of popular savings schemes linked to the acquisition of housing, and h) Grant credits of all types to both constructors and acquirers of popular and medium housing, this temporarily and only for a maximum period of eight years, as provided in the ninth transitory article of the decree. The administration of the Society would be entrusted to a board of directors integrated by the Secretary and Undersecretary of Finance and Public Credit, the Secretary of Social Development, and the Governor of the Bank of Mexico, as representatives of series A, as well as by three independent advisors designated by the Federal Executive through the Secretariat of Finance and Public Credit, appointment that must fall on persons who have no conflict of interest with the Society. The integration proposed for the board attends to the convenience of having a governing body in which both public officials from departments related to housing and independent advisors participate, in order that the promotion of the housing market be entrusted to a plural group with knowledge of the subject. The administration of the Society would also be entrusted, within its respective sphere of competence, to a General Manager, designated by the Federal Executive through the Secretariat of Finance and Public Credit, ensuring that such appointment falls on a person who has the necessary experience for it. Additionally, the administration of the Society would be assisted by a salary and benefits committee whose function would be to advise and propose to the board of directors the policies to be followed in matters of salaries and benefits of public officials who work for the Society. The passive operations of Nacional Hipotecaria would be backed by the Federal Government for a period of twelve years counted from the entry into force of the Decree, with which it would be ensured that its funding cost is reasonable. As already noted above, FOVI would retain its character as a trust, but would be administered by Nacional Hipotecaria as a substitute trustee. It would continue to be in charge of developing the
operations it currently carries out, without thereby closing the possibility that in the future other activities directly related to its functions could be entrusted to said trust. With the object of avoiding possible conflicts of interest, it would be established that in those trusts that could celebrate operations in which the Society would be the beneficiary, none of its officials could participate in the technical committee entrusted with the administration of the trust in question. Finally, it should be noted that to ensure strict compliance with the provisions applicable to the functioning and operation of the Society, it is proposed that the inspection, supervision, and surveillance of the same be entrusted to the National Banking and Securities Commission. For the above reasons, the Federal Executive on my charge, in the exercise of the power conferred upon it by Article 71, fraction I, of the Political Constitution of the United Mexican States, through that Honorable Chamber of Deputies, submits to the consideration of the Honorable Congress of the Union, the following initiative:
EXPOSICION DE MOTIVOS
(Decree of June 24, 2002)
Development banking institutions have the objective of attending to those persons who, due to market imperfections, are not attended to by private financial intermediaries. In most cases, these are sectors and individuals who are not subjects of credit for financial intermediaries, due to cost, level of risk, lack or insufficiency of guarantees, geographic reasons, adverse selection due to lack of experience, lack of credit history, among others. These institutions are integrated into the coordination of a medium- and long-term development policy directed by the Federal Government itself, oriented towards channeling financial resources to specific sectors and projects. To fulfill this mandate and given the current, highly dynamic and competitive environment, it is necessary to increase the operational capacity of development banking, as well as the efficiency of the services they offer, foster and strengthen financial intermediaries, and expand the coverage of these. To achieve the foregoing, some modifications to various regulations are required, as indicated below:
In the administrative realm, the modernization and efficiency in the use of resources is sought. In this sense, it will correspond to the board of directors of each institution to approve general budgets without the need to resort to various instances to obtain authorization, as long as they remain within the parameters of programmed spending, in consideration that national credit societies do not use fiscal resources for their expenses and investments, and must observe the general norms in matters of budgets applicable to the specific case. With the aim of having greater capacity to act in response to the requirements of the different sectors attended to by development banking in the country and to face competition in the global environment in which they operate, it is necessary to direct the efforts of development banking to their substantive activities. For this, it requires adopting agile actions that allow it to make its purchases, contract services, leases, and works in a timely manner both in the country and abroad, for the correct functioning of these institutions, which is why they will not be subject to the Law on Acquisitions, Leases, and Services of the Public Sector nor to the Law on Public Works and Related Services. Notwithstanding the foregoing, this Decree records the need to establish the guidelines under which such activities will be carried out in compliance with what is provided by Article 134 of the Constitution. The board of directors will have additional powers in matters of budgets for expenses and investment, acquisitions, leases, services, public works, salaries, and benefits, in order to make the reform congruent regarding administrative modernization. At all times, constitutional principles will be observed, where as a general rule the obligation to assign through public bidding will prevail, in transparent processes that allow each institution to obtain the best market conditions regarding price, quality, financing, and timeliness. Likewise, it will be sought to ensure economy, efficiency, honesty, and impartiality in the respective processes. Only in those cases where public bidding is not suitable, procedures of restricted invitation or direct award will be carried out, for which the board of directors itself, without departing from constitutional principles, will establish the bases, policies, and procedures that will regulate the contracts, agreements, orders, or accords celebrated by development banking for its acquisitions, leases, services, and public works. The administrative body of the societies is granted the faculty to create salary and benefits committees and integrated risk management committees. The first of these as a support body that will advise and propose to the board of directors of each institution, the terms and conditions under which the relationships between development banking institutions and their workers will be developed, according to market conditions and the possibilities of each
development banking institution, in accordance with the sector, eliminating discretionary powers and providing greater legal certainty. In matters of risk management, the board of directors is authorized to create this type of committee, with the object that such risks are diversified and the limits (sic) of maximum direct and contingent responsibilities are contained, in congruence with what various prudential provisions indicate. The Secretariat of Finance and Public Credit will establish global maximums for each institution to meet its needs for current spending, physical investment, levels of net, internal, and external indebtedness, net financing, and financial intermediation, with the object of controlling the impact of aggregate demand according to the established macroeconomic policy. With the object of clearly establishing the competence of the Secretariat of Finance and Public Credit to determine the characteristics of active, passive, and service operations and that of the Bank of Mexico, in the cases of passive operations that imply capturing resources from the public, trusts, mandates, commissions, money market operations, as well as financial operations known as derivatives, each organic law of national credit societies incorporates a reform in this sense, which seeks to clearly establish the scope of competence of each of the two institutions. With the intention that development banking institutions only attend to the sectors corresponding to them according to their object and do not divert resources to specific sectors or persons or belonging to groups with common interests, different from financial intermediaries, the board of directors of each institution itself will establish the limits for credit operations in this case. With the purpose of avoiding the use of fiscal resources by development banking institutions to meet the guarantee that the Federal Government grants them by virtue of law, an obligation is incorporated on the part of national credit societies to contribute resources to a trust that will have among its purposes supporting the fulfillment of their obligations derived from the capture they carry out from the general public, as well as to contribute to the strengthening of the capital of said societies, in order to ensure their permanence in the medium and long term. Corporate best practices are incorporated into the administration bodies of development banking, which aim to strengthen these decision-making bodies, since by granting greater powers to the board of directors, it is necessary at the same time to develop some measures that allow better performance of its members. In this sense, the figure of the independent advisor is incorporated, appointment that must fall on persons who, due to their knowledge, experience, and professional prestige, are widely recognized; these advisors will represent series "B" of contribution certificates. With the purpose that independent advisors assume their responsibility,
they will have no substitutes and in certain matters, their vote will be decisive, since some (sic) decisions must count with qualified majorities determined by the vote of these advisors. It is important to highlight that independent advisors must not have any link with the society that represents a conflict of interest, in addition to the confidentiality they must keep in matters, which are debated within the respective collegiate body. The reform also seeks to reaffirm the participation of development banking institutions through private financial institutions that assume total or partial risk of recovery of support, notwithstanding that there are some exceptions in operations that given their nature or special circumstances, must be attended to directly. Without a doubt, this reform implies greater freedom for development banking institutions, which will result in the optimization of resources. However, it is necessary to have information on the set goals, expenditure exercise, program compliance, information that will be delivered to the Federal Executive, through the Secretariat of Finance and Public Credit, which will also be remitted to the Congress of the Union in an annex along with the Reports on the Economic Situation, Public Finances, and Public Debt. For the above reasons, the Federal Executive on my charge, in the exercise of the power conferred upon it by Article 71, Fraction I, of the Political Constitution of the United Mexican States, through that Honorable Chamber of Deputies, submits to the consideration of the Honorable Congress of the Union the following initiative:
EXPOSICIÓN DE MOTIVOS
(Decree of August 1, 2005)
On August 14 of last year, the Official Gazette of the Federation published the Decree of reform and additions to the Political Constitution of the United Mexican States in its articles 1, 2, 4, 18, and 115. From that date, the new legal framework for the protection, exercise, and respect for the rights and cultures of indigenous peoples of our country entered into force.
With this reform, the Permanent Constituent took (sic) a historic, unprecedented step by recognizing indigenous communities with their own legal personality, explicit social, economic, and cultural rights, and granting the highest legal value to their rights to self-determination and autonomy; as well as, by defining inescapable tasks for the Mexican State in favor of indigenous peoples and communities.
Conscious of the need to create favorable conditions to ensure the full application of the constitutional reform, in the Second Transitory Article of said Decree, the Legislator ordered the Congress of the Union and the various Legislatures of the federative entities, “to make the adjustments to federal laws and local constitutions that proceed and regulate what is stipulated here.”
This responds to the initiative now presented, with the aim of also inscribing Development Banking in the effort that different national institutions must make to contribute, from their respective scopes of competence, to making the constitutional mandate a reality.
Inclusive, among the tasks and actions that the new Article 2nd Constitutional in its Section “B” orders the State and that the different institutions of Development Banking can support, are the following:
“Promote the regional development of indigenous zones with the purpose of strengthening local economies and improving the living conditions of their peoples...” (Fraction I) “Improve the conditions of indigenous communities and their spaces for coexistence and recreation, through actions that facilitate access to public and private financing for the construction and improvement of housing, as well as expand the coverage of basic social services.” (Fraction IV) “Extend the communication network that allows the integration of communities, through the construction and expansion of communication and telecommunications infrastructure...” (Fraction VI). and, “Support productive activities and the sustainable development of indigenous communities through actions that allow them to achieve sufficiency of their economic income, the application of incentives for public and private investments that promote the creation of jobs, the incorporation of technologies to increase their own productive capacity, as well as to ensure equitable access to supply and marketing systems.” (Fraction VII) With this end, it is proposed to reform or add the respective organic laws of the BANRURAL System; of the National Bank of Public Works and Services; of Nacional Financiera and of the National Bank of Foreign Trade, such that, collectively, they facilitate access to sources of financing for indigenous communities, and no less important, to the systems of advice, training, and commercial promotion offered by these banking institutions. Therefore, and with the aim of giving due compliance to what is provided in the new text of Article 2nd Constitutional, and in accordance with what is established in the Second Transitory Article of the respective Constitutional Reform Decree, we submit to the consideration of this Honorable Chamber of Senators, the following:
EXPOSICION DE MOTIVOS
(Decree of June 22, 2006)
On October 11, 2001, the Organic Law of the Federal Mortgage Society, regulatory of the sixth paragraph (currently fifth paragraph) of article 4th constitutional, was published in the Official Gazette of the Federation; which establishes that every family has the right to enjoy dignified and decent housing and that, in order to achieve such objective, the law will establish the necessary instruments and support.
The creation of the Federal Mortgage Society, in compliance with the constitutional mandate indicated, came to complement and modernize the structure of public institutions dedicated to housing financing. In particular, the Institute of the National Housing Fund for Workers was responsible for supporting only those who work in the private sector, and on the other hand, the Housing Fund of the Institute of Security and Social Services for State Workers has had as its object granting financing to those who work in the public sector. In light of this, it has been of interest to the State to attend to the sector of the population excluded by those institutions that for years was attended

partially by the Banking Operation and Financing Fund for Housing (FOVI), a trust previously administered by the Bank of Mexico, and now under the responsibility of the Federal Mortgage Society (Sociedad Hipotecaria Federal). Thus, the establishment of the Federal Mortgage Society aims to promote the development of the primary and secondary housing credit markets, by granting guarantees intended for the construction, acquisition, and improvement of housing, preferably of social interest, as well as the increase in productive capacity and technological development related to housing.

Over these years, the results have been satisfactory. From 2002 to 2005, there was an average annual growth of 25 percent in housing credit financing granted by limited-object financial societies, rising from 46,142 credits granted in 2002 to 89,539 in 2005. Likewise, as a result of the support and actions developed by the Federal Mortgage Society in credit for the construction of new housing, 20,170 credits were granted in 2002 and 49,017 in 2005, reporting growth of more than 100 percent during that period.

Similarly, through its guarantee programs, the Federal Mortgage Society has managed to channel resources from different sources into the sector. This has allowed laying the foundations for the development of the secondary housing credit market, which by 2005 had reached resources amounting to approximately 6,200 million pesos.

Now, despite these results, the experience acquired over the first four years of operation of the Federal Mortgage Society suggests making some adjustments to its organic law to achieve the main purposes mentioned below:
a) Allow the Federal Mortgage Society to have subsidiary insurance institutions dedicated exclusively to granting housing credit insurance and financial guarantees in the same sector, in accordance with the reform to the General Law of Insurance and Mutual Insurance Companies, which recently approved by the Honorable Congress of the Union, regarding such operations; and b) Improve the corporate governance structure of the Federal Mortgage Society, with the purpose of strengthening its management, promoting the stability of its policies, and attempting to assimilate its legal regime in this matter to that provided in the laws recently approved by that Sovereignty, such as the Securities Market Law.

This initiative proposes that Article 4 of the Organic Law of the Federal Mortgage Society, regarding the operations it may carry out, be added to include the authority to make contributions for the establishment of such insurance institutions or to invest in their share capital. In order to establish the conditions and terms under which the Federal Mortgage Society may participate in the aforementioned insurance institutions, this initiative proposes adding a Fourth Bis Chapter to the same legal instrument.

If this reform is approved, only insurance institutions, subsidiaries of the Federal Mortgage Society, that have as their object to conduct insurance operations in the lines of housing credit and financial guarantee may be established. Regarding the applicable legislation for housing credit insurance and financial guarantee insurance, the Federal Mortgage Society, in relation to this type of operations, would only retain the authority to offer credit guarantees that cannot be considered as active insurance operations.

Likewise, through the aforementioned insurance institutions, the development of the secondary housing credit market would continue to be promoted. In particular, insurance operations in these lines would create improvements to housing credits that back securities placed with the investing public. With this facility, investment of resources destined for granting credits for the acquisition and construction of housing is incentivized.

On the other hand, subjecting insurance institutions, subsidiaries of the Federal Mortgage Society, to the legislation applicable to insurance activity would inhibit potential unfair competition that could materialize to the detriment of other insurers engaged in that same activity. The foregoing is justified, since the insurance operations in question, if this initiative is approved, would be registered in the balance sheets of the insurance institutions subsidiaries of the Society, and, being operations inherent to such institutions, they must be subject to the applicable regulations in that matter.

In this way, any possible regulatory advantage for the Federal Mortgage Society would be avoided, which, in turn, could inhibit the formation of other insurance institutions of this type that the primary and secondary housing credit markets require to achieve their development and deepening.

Similarly, under the regime applicable to insurance operations, the subsidiary institutions of the Federal Mortgage Society must implement the mechanisms provided by said regime to mitigate the risks they assume, such as: concluding reinsurance contracts, maintaining investments of their reserves in terms that guarantee their appropriate liquidity, and facilitating the application of protection measures for the respective users.

In this vein, it must be taken into consideration that, in accordance with the applicable regulations for these institutions and since the shares representing the share capital of such insurance institutions will remain under the ownership of the Federal Mortgage Society, as a national credit institution, such institutions will be entities of the Federal Parastatal Public Administration, and will only have the particular characteristic that their board of directors would be integrated with the same members proposed for the Board of Directors of the Federal Mortgage Society. In this way, consistency will be given to the decisions made in the governing bodies of the Federal Mortgage Society's subsidiary entities.

Likewise, it is fundamental to keep in mind that, although this development banking institution would be allowed to invest in the share capital of insurance institutions, as an exception to the current financial provisions, the risk in which that credit institution could incur would be limited. This is so, if it is taken into consideration that the lines to which the insurance institutions would be dedicated will only be those related to the same object of the Federal Mortgage Society, since they refer to operations that, from a financial point of view, produce effects substantially similar to those guarantee operations that the credit institution has been carrying out in fulfillment of its object. Consequently, for the reasons stated here, the exception, for the Federal Mortgage Society, proposed for the general principle of avoiding the investment of credit institutions in insurance institutions, does not foresee that it may translate into an impact on the economic solvency of said national credit society.

In addition to the foregoing, this Initiative proposes that the general managers of the insurance institutions subsidiaries of the Federal Mortgage Society be appointed by the Board of Directors of the latter, upon proposal of the Secretary of Finance and Public Credit. Likewise, it allows the possibility that the appointment of the general manager of each of said insurance institutions falls to the General Director of the Federal Mortgage Society. In the same vein, this Initiative proposes establishing that the operation of the insurance institutions be supported, in terms of the applicable provisions, by the administrative structure currently available to the aforementioned Society, in order to take advantage of the resources and capacity of the public servants of the Federal Mortgage Society resulting from its current activity.

It is also foreseen that the Federal Mortgage Society will respond subsidiarily and unlimitedly for the fulfillment of the obligations of the insurance institutions in whose capital it participates, in terms of the proposed reform, as well as for their losses. For this, it must be taken into account that this Initiative proposes including provisions that obligate the Federal Mortgage Society to, in case it invests in the share capital of the aforementioned insurance institutions, such investment be for all but one of the shares representing the capital of such institutions.

With this formula, it is sought that the operations of the Federal Mortgage Society's subsidiary institutions be considered in the market with the same credit quality as that of this development banking institution. Thus, the insurance operations offered by these institutions would enjoy the same conditions as those currently prevailing for the operations of the Federal Mortgage Society itself.

Regarding corporate governance, it is proposed to modify the integration of the Board of Directors of the Federal Mortgage Society so that, instead of being integrated by seven people, in the future they will be formed by nine councilors, of whom five would be ex officio and four independent. The first group, representative of the "A" series of capital contribution certificates of the Society, would be formed by: the Secretary of Finance and Public Credit, the Undersecretary of the same Ministry, the Governor and a Sub-governor of the Bank of Mexico, and the Ministry of Social Development, through the National Commissioner for Housing Development.

As for the four independent councilors, it is proposed to maintain the policies and programs of the Federal Mortgage Society and its subsidiaries, for which purpose, for such effect, it is planned that such councilors be appointed, for staggered four-year terms, by the holder of the majority of the capital contribution certificates of the "B" series. Only in the case where such holder is the Federal Government, it is proposed that the appointment be made by whoever heads the Secretary of Finance and Public Credit, since this is the department of the Federal Public Administration that acts as coordinator of this development banking institution. To ensure the adequate initial integration of this collegiate body, in the transitional regime included in this initiative, it is suggested that the terms of the first councilors conclude on December 31, 2008, 2009, 2010, and 2011.

In order to ensure that only persons with the required preparation participate in the Board of Directors and are free of conflicts of interest, it is proposed to expand the requirements to be appointed as an independent councilor. Thus, in addition to the requirements currently provided in the law, it is foreseen that these persons must meet the following characteristics: be in full enjoyment of their rights and not have more than 70 years completed at the start of the corresponding period; have held, for at least five years, high-level positions in financial, legal, administrative, or accounting matters; not be a shareholder, official, attorney, or agent of companies dedicated to construction or marketing of housing, or a relative in the first degree of persons having any of the aforementioned characteristics; and not have been convicted of intentional crimes, nor disqualified from exercising commerce or holding an office, position, or commission in public service or in the Mexican financial system.

Likewise, some adjustments are made to the causes for removal of these independent councilors.

It is also proposed that the remuneration of independent councilors be charged to the authorized budget of the Federal Mortgage Society and be fixed by its Board of Directors, upon proposal of the Human Resources and Institutional Development Committee of the institution itself; to this effect, consideration must be taken of the labor market conditions for this type of services in the Mexican financial system.

For the oversight of the Federal Mortgage Society, as well as of the insurance institutions in whose capital it participates, it is proposed that it be entrusted to an inspector appointed by the Ministry of Public Function and to an Audit Committee integrated by the independent councilors, from among whom the Board of Directors will appoint its president. The functions assigned to this Committee are similar to those provided for this administration body, and it will be auxiliary to the council, in the new Securities Market Law and in the internal control circulars issued by the National Banking and Securities Commission.

On the other hand, the Human Resources and Institutional Development Committee of the Federal Mortgage Society is strengthened, with the incorporation of two independent councilors and the participation of an expert in human resources external to the Society itself.

Finally, the following adjustments to the Organic Law of the Federal Mortgage Society are proposed:
(i) Include in the definition of financial entities, with which the Federal Mortgage Society may operate, development banking institutions, financial lessors, factoring financing companies, credit unions, savings and loan cooperative societies, and popular financial societies, given the consideration that all of them can contribute to the fulfillment of the Society's object; (ii) Specify within the catalog of operations that the Federal Mortgage Society may carry out that the guarantee of credits and securities related to housing financing is with respect to those granted or issued by financial entities, under the assumption that these are not the subject of placement with the investing public, unlike financial guarantee insurance granted by insurance institutions, which are granted for such purpose; (iii) Recognize within the aforementioned catalog of operations the possibility that the Federal Mortgage Society invest in the share capital of companies that provide it with complementary or auxiliary services in the administration or realization of its object or constitute this type of companies, in accordance with what is provided in articles 42, fraction XVI, 46, fraction X, 75, 88, and 89 of the Credit Institutions Law, and (iv) Provide that the Federal Mortgage Society provide members of its Council and public servants working for it with legal assistance and defense services, regarding the acts that the aforementioned persons carry out in the exercise of the functions entrusted to them by law, understanding that if the competent authority issues a final resolution against the subject of legal assistance, the latter must reimburse the Society for the expenses and any other disbursements incurred for that reason.

For the reasons stated, the Federal Executive in my charge, in the exercise of the faculty granted to it by article 71, fraction I, of the Political Constitution of the United Mexican States, through that Honorable Chamber of Deputies, submits to the consideration of the Honorable Congress of the Union the following initiative for STATEMENT OF MOTIVES (Decree of August 20, 2008)

On October 11, 2001, the Decree by which the Organic Law of the Federal Mortgage Society was issued, regulatory of the fifth paragraph of article 4 of the Political Constitution of the United Mexican States, was published in the Official Gazette of the Federation; which establishes that every family has the right to enjoy a dignified and decent home and that, in order to achieve such objective, the law will establish the necessary instruments and support.

The creation of the Federal Mortgage Society, in compliance with the constitutional mandate stated, came to complement and modernize the structure of public institutions dedicated to housing financing, taking into account that the Institute of the National Housing Fund for Workers is concerned only with supporting those who work in the private sector and, on the other hand, the Housing Fund of the Institute of Security and Social Services for State Workers has as its object to grant financing to those who work in the public sector. In this regard, it has been of interest to the State to have a financial instrument, such as the Federal Mortgage Society, to seek attention to the sector of the population not attended by those institutions, considering that currently of the 26.7 million households in Mexico, it is estimated that 69% find their main source of income within the non-salaried sector and only 31% of the remaining within the salaried sector, and that the Mexican population is concentrated in low-income strata that are also marginally attended by the current schemes.

Thus, the Federal Mortgage Society aims to promote the development of the primary and secondary housing credit markets, solely through the granting of guarantees intended for the construction, acquisition, and improvement of housing, preferably of social interest, as well as the increase in productive capacity and technological development related to housing, for which it was established in the Ninth Transitory Article of the aforementioned Decree that the Federal Mortgage Society would cease to grant loans and credits to the financial entities with which it operates on October 12, 2009, with the objective of promoting the development of alternative sources of financing and incorporating private financial entities into the housing financing market in an inclusive manner, considering that in 2001 the market was growing with the Institute of the National Housing Fund for Workers, limited-object financial societies (sofoles) recently created at that time, and multiple banking institutions (banks) were regaining their participation.

Currently, said market is sophisticated and complex, since solid sofoles with adequate originations standards participate, the participation of the Institute of the National Housing Fund for Workers and the Housing Fund of the Institute of Security and Social Services for State Workers has consolidated, and banks are acting decisively, in addition to the fact that other financial entities are starting their participation, such as savings and loan entities and multiple-object financial societies (sofomes); but although the desired results were achieved, it is considered important to reconsider the activities of the Federal Mortgage Society in the development of the primary and secondary housing credit markets and the validity of the

arguments originally raised in the Decree by which the Organic Law of the Federal Mortgage Society was issued, regarding the temporary participation of the Federal Mortgage Society in the granting of credit, taking into account that there is still a backlog in serving low-income and non-salaried populations, which requires maintaining the momentum achieved to provide greater effectiveness in housing credit.

Additionally, the global economic scenario resulting from the recent crisis in the United States mortgage markets is of special relevance, representing a particular concern that has made evident the need for permanent action to address the decrease in funding for housing finance, with the Federal Mortgage Society being the ideal State entity that, through the granting of credit under certain circumstances, can provide the stability required by the housing credit market.

In view of the dynamic environment in which development banking institutions operate, as has been evident in various forums held by the current Legislature and with the special participation of the Joint Committees of this Senate Chamber, it has been deemed appropriate to incorporate the Federal Mortgage Society into the development banking reengineering process, by granting it greater management autonomy and institutional strengthening that allow it to have regulatory elements for the fulfillment of its mandate.

For the above reasons, it has been deemed appropriate to reform the Organic Law of the Federal Mortgage Society in two main aspects:

I. Expand the activities of the Federal Mortgage Society, empowering it to continue granting credit under the criteria determined by its Board of Directors, with terms and goals consistent with the needs to serve the market segment requiring it or to maintain the stability of said market under unusual conditions, as well as other relevant activities for the better fulfillment of the object for which it was created.

II. Institutionally strengthen the Federal Mortgage Society, while strengthening its internal governance according to best practices and granting it greater management autonomy to allow it to adequately attend to the activities corresponding to it in order to maintain its dynamism in the face of sector needs.

The expansion of activities aims to provide greater accessibility to housing solutions for the population currently insufficiently served, streamline housing credit financing for the population that already has access, and maintain the momentum for the development of the primary housing credit market.

To this end, it is considered important to analyze the activities of the Federal Mortgage Society in the development of primary and secondary housing credit markets, as far as the granting of credit by the Federal Mortgage Society is concerned, it has allowed generating portfolio origination standards, financial profile of the credit product, credit administration, as well as credit risk taking, facilitating the specialization of financial entities in the most relevant activities in their operations, such as origination, administration, and collection of their portfolio, leaving the Society with market and prepayment risk management capabilities, taking advantage of the economies of scale it can achieve. In this regard, to provide greater accessibility to housing solutions for the population currently insufficiently served, it will only be achieved if other financial entities participate in this; in this sense, the experience of the Federal Mortgage Society indicates that to develop an efficient network of origination and administration of housing credits, it is important to focus the efforts of financial entities on this type of activity, so that having a stable source of long-term financing allows financial entities to boost their growth and consolidation, mitigating market risk, and allowing the development of their housing credit origination and administration capabilities focused on the segment of the population that is still not sufficiently served.

Currently, the development role of financial entities carried out by the Federal Mortgage Society, reflected in the significant growth in the granting of housing credit, constitutes a

precedent for new financial entities, such as sofomes or savings and loan entities, which are currently starting their activities in the housing credit market, to receive support from the Federal Mortgage Society to specialize in mortgage matters and acquire the financial capabilities to originate and administer housing credit, which will allow serving the segment of the population that still does not have sufficient housing solutions, not only because they represent new financing alternatives, but also because of their specialization in this segment.

Likewise, the recent subprime mortgage crisis in the United States of America showed the fragilities of housing finance markets, both in Mexico and in that Country, in which governmental financing mechanisms prevailed as a stable source of liquidity and played a relevant role in reestablishing (sic) order in the markets, attempting to mitigate the adverse effects caused by the subprime mortgage crisis in the aforementioned Country.

In this regard, in Mexico, the Federal Mortgage Society has offered credit lines available to the financial entities with which it operates, dissipating the probability of adverse effects derived from a lack of liquidity in the markets, and has maintained high and constant financing rhythms during this same period, generating certainty and avoiding turbulence in the national market.

It is important to highlight that the granting of credit by the Federal Mortgage Society will be carried out with the aim of promoting the development of any segment of the primary and secondary housing credit markets or to ensure the stability of said markets in accordance with the criteria defined by its Board of Directors, which are proposed to include at least: i) the characteristics to delimit the market segments that require development without inhibiting the participation of the private sector under conditions of sound competition in these segments; ii) the terms or goals to determine when the Society must conclude the granting of credits to the respective market segment, for which it must consider that sound competition practices have been developed and there is sufficient and adequate participation of the private sector, and iii) the criteria to authorize the participation of the Federal Mortgage Society in the granting of credits during unusual market circumstances, with the purpose of maintaining liquidity and sound operation of the housing credit sector.

Although it is proposed that the Federal Mortgage Society continue to grant credit, the manner in which it does so is important, given that to date it has done so through mechanisms that, although they may result in more (sic) expensive, offer more immediate liquidity than can be obtained from securitization; thus, through these modifications, the Federal Mortgage Society will be allowed to act in the face of adverse conditions in the housing credit market, thereby addressing the concern of this Legislature to have in Mexico expedited mechanisms to address external crises, such as the "subprime" credit crisis, with the Federal Mortgage Society being the Mexican State entity that permanently, through the granting of credits, will ensure stability in housing finance. In addition, to ensure that the Federal Mortgage Society maintains the solvency it requires, the proposal establishes that its Board of Directors must establish prudential policies that limit its exposure to risk derived from its function as a market liquidity provider, and it is foreseen that any financing it grants must have collateral and satisfy the criteria defined by the Board of Directors itself.

In accordance with the above, it is proposed to repeal the Ninth Transitory Article of the Decree by which the Organic Law of the Federal Mortgage Society was issued, as well as to expand the catalog of financial entities with which it can conduct its operations, to include multiple-object financial societies and savings and loan entities, which are operating under the transitional regime established in the "Decree by which various provisions of the Savings and Popular Credit Law are reformed and added," published in the Official Gazette of the Federation on May 27, 2005, and which, in terms of said Decree, have submitted their file to the National Banking and Securities Commission to operate as a Savings and Popular Credit Entity, empowering the Board of Directors of said Society to determine other persons that may be considered as financial entities to operate with the Federal Mortgage Society.

Finally, regarding the expansion of activities, it is proposed: i) that the Federal Mortgage Society may provide consulting services, taking into account that the experience in the development of primary and secondary housing credit markets in Mexico has been recognized internationally, so the Society has received multiple requests to carry out the foregoing, and by including it in its operations, it will allow sharing the knowledge and experiences acquired, as well as obtaining income to cover operational costs, and ii) that the Federal Mortgage Society may contract the services of companies in whose capital it participates, without the Public Procurement, Leasing and Services Law being applicable for such effect, thus correcting a legal void.

Consistent with the discussions in the Senate through various forums held, oriented to support and promote the role of development banking, regarding institutional strengthening to provide the Society with greater management autonomy, strengthening its governing bodies, the proposal for Reforms to the Organic Law of the Federal Mortgage Society contemplates the following main aspects: i) the precision of the members of the Board of Directors; ii) the powers of the aforementioned Board of Directors and the General Director; iii) the integration and powers of the Society's Audit Committee; iv) specific obligations for the regulatory comptroller, and v) the precision of the characteristics, requirements, and rights of external councilors.

Regarding the precision of the members of the Board of Directors, it is proposed to eliminate the reference to the Secretariat of Social Development, by the name of the National Housing Commission, consistent with the current legal nature of said Commission derived from the Housing Law.

As for the powers of the Board of Directors, in accordance with the reengineering of development banking institutions, it is specified that the approval of topics related to its organizational structure and the administration of its personnel do not require the fulfillment of any other requirement, provided it has an authorized budget and as an exception to what is provided by Article 67 of the Federal Budget and Fiscal Responsibility Law; in this regard, in accordance with the Reform proposal and in accordance with what is provided in the Credit Institutions Law, the fulfillment of any other additional requirements, such as registrations, authorizations, or determinations of other dependencies, is eliminated, thereby recognizing the Board of Directors as the sole instance for its approval, granting the Federal Mortgage Society the management autonomy it requires to face changes in its environment and also avoiding interpretations that lead to duplication of activities regarding the analysis of these topics by other instances, principles that are also reflected in the granting of powers for said Governing Body to designate the head of the internal comptroller of the Federal Mortgage Society, who in turn will be responsible for the internal audit area, taking into account that for the fulfillment of such functions, the Board of Directors must rely on the internal structures of the Institution to have sufficient, precise, and timely information, as well as to evaluate its issuance process and the effectiveness of the internal controls necessary for an orderly and reliable operation.

Consistent with the Reform proposal, it is necessary to integrate into the powers of the Board of Directors those related to the granting of credit under the terms previously exposed, being of particular relevance that the criteria derived from the exercise of that power must also contemplate, in addition to adverse market situations, the attention to eventual natural disasters, with the purpose of providing credit support to the population that, due to such phenomena, is deprived of such an important satisfaction as housing, representing a market segment that deserves attention; additionally, the issuance of norms and bases to be followed for the sale at market price of movable or immovable property received in payment or adjudicated to the Federal Mortgage Society and to insurance companies in whose capital it participates, without the General Law of National Assets nor the Public Procurement, Leasing and Services Law being applicable to it, is integrated into the powers of the Board of Directors, with the aim of providing the necessary agility for the adequate control and sale of this type of assets derived from its operation and thus being in the same conditions as other financial entities in similar situations.

Likewise, through the experience of the Federal Mortgage Society, it is necessary to specify the powers of the General Director, regarding the formulation of the annual work plan, as well as the long-term plan of the Society of at least five years, to submit them for consideration to its Board of Directors, and to grant it explicit powers to issue certifications, with the aim of providing agility to comply with the provisions established in the Federal Law of Transparency and Access to Government Public Information.

A particular issue is the proposal that the head of the administrative unit in charge of the legal area of the Federal Mortgage Society may represent it when it is the responsible authority in the amparo trial, with the purpose that the Society has adequate representation in this type of trials, derived mainly from its actions in terms of the Transparency Law and the Promotion of Competition in Guaranteed Credit Law.

To be able to adequately distribute the activities of the external councilors of the Federal Mortgage Society and that they are focused on the specialty of their experience, it is proposed to modify the integration of the Audit Committee, to include two of them, designated by the Society's Board of Directors, and a third member, which is proposed to also be designated by the Board of Directors and whose audit experience and profile allow for better control and support of the functions, modifying congruently the quorum integration of said Committee.

Regarding the functions of the Audit Committee, and considering that by granting the Federal Mortgage Society greater management autonomy, it is also necessary to strengthen the collegial oversight bodies, the proposal for Reform expands the powers of said Committee, particularly regarding the audit program for each exercise, which will be prepared by the internal comptroller, submitted for consideration to the Audit Committee, and approved by the Board of Directors, as well as regarding the internal audit reports, and with the aim of avoiding duplication and conflicts regarding the definition of functions between the internal audit area and the internal control body dependent on the Secretariat of Public Function, this collegial body is granted the power to establish guidelines regarding this, in accordance with the provisions of the National Banking and Securities Commission.

Continuing with the strengthening of controls and given the activities of the internal comptroller, the Reform proposal considers that this public official may also serve as the regulatory comptroller of insurance companies in whose capital the Federal Mortgage Society participates, a mechanism that will allow consolidating information related to such controls and maintaining the management autonomy required by the Institution.

Likewise, with the aim of having external councilors in the integration of the Board of Directors, with persons who, due to their knowledge and experience, enrich the performance of this Governing Body, with the security and certainty that this function requires, it has been deemed appropriate to establish in the Organic Law of the Federal Mortgage Society, regarding external councilors, that they will not be part of the Society's personnel, and therefore will not be considered public servants; the possibility that the Society provides them with assistance and legal defense services, regarding the acts they carry out in the exercise of the functions entrusted to them by law and for which they are absolved of responsibility, and eliminate the maximum age requirement to be designated as an external councilor.

The proposed initiative represents a transcendental boost to confer upon the Federal Mortgage Society a regulatory framework that allows it to adequately fulfill its important labor in the development of primary and secondary housing credit markets, facilitating it to grant credits for this purpose and strengthening it institutionally by granting it the necessary management autonomy to maintain its relevance in the dynamic environment in which it operates, thereby seeking to fulfill the constitutional mandate that every family has the right to a dignified home.

In view of the above and based on what is provided in Section II of Article 71 of the Political Constitution of the United Mexican States, I permit myself to submit to the consideration of the Honorable Congress of the Union the following:

REFERENCES
1) Reformed by Decree published in the Official Gazette of the Federation on June 24, 2002.
2) Added by Decree published in the Official Gazette of the Federation on June 24, 2002.
3) Repealed by Decree published in the Official Gazette of the Federation on June 24, 2002.
4) Added by Decree published in the Official Gazette of the Federation on August 1, 2005.
5) Reformed by Decree published in the Official Gazette of the Federation on June 22, 2006.
6) Added by Decree published in the Official Gazette of the Federation on June 22, 2006.
7) Reformed by Decree published in the Official Gazette of the Federation on August 20, 2008.
8) Added by Decree published in the Official Gazette of the Federation on August 20, 2008.
9) Repealed by Decree published in the Official Gazette of the Federation on August 20, 2008.
10) Reformed by Article Eighteen of the Decree published in the Official Gazette of the Federation on January 10, 2014.
11) Added by Article Eighteen of the Decree published in the Official Gazette of the Federation on January 10, 2014.
12) Repealed by Article Eighteen of the Decree published in the Official Gazette of the Federation on January 10, 2014.