Will USD Mortgage Loans Ever Resurface
In Mexico? Yes, but...
Will USD Mortgage Loans Will Ever
Resurface In Mexico? Yes, but not coming from a bank or any institutional
lender as far as we are concerned. And
the reasons for this are the following:
-
- USD
mortgage loans in Mexico, which normally had interest rates in the range of 6%
to 9% in the past, are not a good business for Mexican Banks which are use to
charging 10% - 14% annual mortgage loan interest rates to their clients.
-
- The
cost of operation of having an In-house underwriting department specialized in
USD Mortgage Loans, will offset the benefit of having such a product (Case in
Point, Scotiabank).
-
..The
lack of Finance Legislation which would allow the creation of licensed mortgage
brokers (specialized mortgage brokers) to relieve some of the above mentioned
operating costs does not seem to be something happening in the immediate future
in Mexico.
-
- In
spite of the fact that Mexican Banks get some of their funding from the
International Market or their parent banking companies (most Mexican banks are
owned by international banks), in addition to their deposits, at low interest
rates, the high cost of banking services and high interest rates is something
Mexican banks are not ready to give up, just yet.
-
- And
last, but not least, the inoperative services some of these Mexican banks
provide through their so called “Risk Assessment” departments, the equivalent
to underwriting departments in USA and Canadian banking, and their lack of open
mind, creative thinking and vision, will continue to be a detrimental aspect of
the process. Thus, unless a specialized department,
a usd mortgage loan program department is created, trying to get a mortgage
loan even with legal residence status, unless the client can provide proof of
income in Mexico, it is next to impossible in the Mexican banking industry. This based on personal experience.
So what is left to do for Americans
and Canadians requiring funding to purchase their vacation home in Mexico, as
well as, for developers targeting this group of investors?
-
First
and foremost, they should do what Banks and Lenders in the USA do lobby for
better terms and conditions from the banking industry to provide funds for commercial
and residential development. We are seen
some interesting legislative reforms in Mexico, such as the new Law of Capital
Gains, the proposed modification to Article 27 of the Mexican Constitution (you
may find info relating to these legislative reforms in our blog, http://hmortgages.blogspot.mx/). These changes being proof of how reforms may work. And a recent case may be seen in new reform
affecting the monopoly of Carlos Slim on the telephone industry in Mexico, read…
-
Mexican
developers should support the creation of new financing vehicles to allow for
the restoration of usd mortgages for American and Canadians as a means of
capitalizing their projects against the alternative, lack of development or
bridge loans, or the ones that may be acquired being provided at very high
interest rates and being very disadvantageous for the commercial and
residential developer market in Mexico.
-
Equity
REITs (FIBRAs) have already made their appearance in the real estate investment
scenery in Mexico, but their participation is limited to Commercial, Industrial
and Hotel real estate, thus leaving the residential market without a viable
alternative.
-
Thus
the need to support and promote Mortgage REITs.
Mortgage REITs which have had an active role in the past in the mortgage
funding process in the USA and Canada, are the solution to a latent residential
mortgage problem for Americans and Canadians in Mexico. For more information on Mortgage REITs, see our blog… http://mortgagereitsinmexico.blogspot.mx/.
Involvement and action are what is
required to bring back usd mortgage financing in Mexico. Financing at reasonable interest rates and
based on a more reasonable funding approach, as was done by previously applied programs.
Unfortunately we will not see these
type of loans come back or promoted by Mexican banks, such as the one promoted
by Scotiabank Canada through their Scotiabank Mexico subsidiary to which they originally vested 50mi. usd. A program that never took off
based on faulty processing and underwriting programs. And one that, when the hard working mortgage loan
executives finally thought they had grasped the concept of it, the highly seated executives
at Scotiabank Mexico decided to close without further notice, claiming it was not profitable.
In conclusion, Mortgage REITs, as a viable option, whether private or public, must be created to fill this funding gap. Read… http://mortgagereitsinmexico.blogspot.mx/2013/05/a-penny-for-your-thoughts-looking-for.html
In conclusion, Mortgage REITs, as a viable option, whether private or public, must be created to fill this funding gap. Read… http://mortgagereitsinmexico.blogspot.mx/2013/05/a-penny-for-your-thoughts-looking-for.html
For further info. regarding mortgage
REITs feel free to contact us at:
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