UPDATE 1-Mexico sees private mortgage-backed debt surging

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MEXICO CITY, Dec 11 (Reuters) - Mexico expects private-sector issues of mortgage-backed securities to double in 2008 amid an ongoing boom in the housing industry and increased demand from local and foreign investors.

Javier Gavito, head of the government's Federal Mortgage Society, told reporters on Tuesday private issues should total 50 billion pesos ($4.6 billion) next year.

International investors who want to avoid the U.S. subprime crisis may look to Mexico's just-developing mortgage-backed debt market, where banks and specialized lenders are expected to sell investors 27 billion pesos in home loans this year, experts say.

"There will be interest in finding better investment quality around the world and Mexico continues to be a very attractive country in that sense," Gavito said.

Mexico's fast-growing mortgage industry is focused on first-time home buyers, many of them with low incomes and little experience with banks. The country does not have a sub-prime sector catering to clients with blemished credit histories.

The country's fast-expanding pension fund operators, including firms operated by BBVA (BBVA.MC) and Citigroup (C.N) have accounted for much of the demand for Mexico's mortgage-backed debt in recent years, and will continue to provide much of the appetite for new issues, Gavito said.

Foreign investors have had only a minor interest in Mexico's mortgage-backed debt, partly because of the small size of issues by international standards, experts say. ($1 = 10.816 pesos) (Reporting by Noel Randewich; Editing by Tom Hals)