UPDATE 1-BBVA Mexico unit to place first mortgage-backed debt

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MEXICO CITY, Dec 17 (Reuters) - The Mexican arm of Spain's BBVA bank plans to place $250 million worth of home loans to investors within the next few days, its first mortgage-backed debt issue in the country's fast-growing housing industry.

BBVA will sell about 3,500 mortgages in the 2.7 billion pesos issue, rated at AAA by ratings agencies, Isidoro Sanchez, the bank's head of mortgage lending, told Reuters on Monday.

Mexico's mortgage industry is expanding quickly thanks to economic stability and a government drive to boost construction to 1 million homes per year. But the country's mortgage-backed debt market remains small.

Mexicans currently owe just over $100 billion in mortgages, according to the government, an amount expected to double in the next four years and increase lenders' need for funding.

"We've got to begin these exercises," Sanchez said.

Most mortgage applicants in Mexico are first-time home buyers, many of them with low incomes and little experience with banks. But the country does not have a subprime sector catering to clients with blemished credit histories.

Private-sector issues of mortgage-backed securities should double in 2008 to $4.6 billion, the government said last week. ($1 = 10.859 pesos) (Reporting by Noel Randewich)