Tom Vanderwall chimes in here on BHB regularly and helpfully about the mortgage situation. I look forward to his interpretation of the spins we get from DJ Bernake and crew.
I handle foreign real estate transactions and here’s what I’m seeing right now. What follows is all buyer-side stuff, because of course they’re the ones looking for financing.
War story. (In progress).
I have a buyer from the Middle East. Extremely solid person, extremely *ahem* solid balance sheet. Wants to buy a house in the $5 million range. No one that I have found (and I have tried mortgage brokers from Florida to California) can put an offer on the table for a sane mortgage. Even at 50% loan-to-value.
He banks with one of the brand name international banks and ordinarily you’d think that they would do something for him, if only to protect their customer relationship. (Considering the other business the bank gets from him and the family business, you’d think . . . .) But no.
So we keep looking. Most likely solution is either an all cash purchase or my buyer will do a margin loan against an investment account outside the U.S.
War story. (In progress).
Family from outside the U.S. is busily buying up rental properties by the handful somewhere in a State that isn’t touched by ocean. Let’s just leave it vague like that. Putting in enough money so the properties will be cash flow positive. Can’t get a single lender interested in taking a look at the portfolio of properties. At any “reasonably close to market” terms.
Again they will leverage offshore assets, borrowing short term. They’re buying all cash, basically lending to themselves (via a nifty “Bank of Me” structure I set up for them), and hoping that in 6 – 12 months they can find a bank that is willing to look at lending against 25 properties all cash flow positive.
War story. (In progress).
Right now. East Coast. Condo purchase, around a quarter million. Same thing.
War story. (In progress). Right now. Extremely *ahem and I do mean extremely* nice house in an extremely *ahem and I do mean extremely* desirable part of Los Angeles. Buyer has lotsa dough.
Your point, Phil? (Besides whining, which you’ve just done extremely well)?
Two points here. I think.
- Somewhere, someday a banker is going to quit his/her job at Old Boring Bank and start a new bank. (I have a client who did this. Twice.) And they’re going to perfect a mortgage product for nonresidents. For houses and investment property. And they’re going to clean up. I know of one Old Boring Bank that took a run at it, but failed. They failed because management changes are so frequent that it is hard to get a product on track and on the market. (Hint: I used to work at a Dead Old Boring Bank. I know. Senior VP changes every 14 months.)
- If you are a real estate agent dealing with a nonresident buyer, you have to tell them the truth about the mortgage situation. (I’m assuming you’re getting the same runaround as me.) My nonresidents are either grumpy or pragmatic. You can move them to pragmatic (which is really useful if you want to, you know, close a deal ‘n stuff) if they understand the Odd Times In Which We Live.
Tom Vanderwell says:
Phil,
Good point. Reminds me of the statement that Bawldguy likes to make:
“Lenders lend.”
Someone should figure out that those can, under the right conditions, be good loans.
Tom VanderwEll 🙂
June 8, 2009 — 5:34 pm
Brian Brady says:
Local banks are making these loans. By local, I mean local to each market area, Phil. This is old school mortgage brokerage meaning the mortgage broker will probably charge a premium for the labor involved.
In Los Angeles, there are a variety of local banks which focus their marketing efforts on certain immigrant communities. That might be an option.
Of course, there are always straight asset-based lenders (READ: hard money) who, for 10% and 5 points will loan 65% on most California residential properties.
Another solution would be to hypothecate marketable securities, in a secured stock loan, to cross-collateralize the real estate loan. Those rates will be around 8% with 1-2points.
When there’s a will, collateral, and money to be made, someone can find a solution.
June 8, 2009 — 9:16 pm
Alfred says:
It seems to me like laziness on the part of the banks. Even though the buyers are perfectly solid, the banks don’t want to take the unlikely chance that they’ll have to put effort into dealing with an international problem. Everything is just so bureaucratic and messy that they miss out on strong clients.
June 9, 2009 — 9:19 am
Travis Bohling says:
It might be that the banks do not want to appear to be using TARP and other bailout monies to finance foreign speculation in our real estate market.
June 11, 2009 — 11:32 am