Call me crazy but I don’t understand why there aren’t any lending programs for Foreign Investors. Right now in Las Vegas, home prices are at historic lows and it’s drawing the interest of real estate investors from all over the world. I get numerous emails and phone calls every day from people outside the United States inquiring about Las Vegas Home prices and the process of buying a home in Las Vegas. Unfortunately, I have to inform them that if they don’t have cash for the entire purchase, they won’t be buying an investment property in Las Vegas.
Doesn’t real estate play an important role in the economy? I think we all know the answer to that question is an emphatic “Yes”! So why aren’t there Loan Programs for Foreign Investors? Many of these large Banks like Wells Fargo and Bank of America could easily create Loan Programs for Foreign Investors that required Foreign Investors to put down at least 30%, open a bank account in the US and anything else they would need to lower their risk. In most real estate markets like Las Vegas, home prices have pretty much bottomed out thus minimizing the risk for the Banks if the Foreign Investor defaulted, especially if they required 30% down.
Creating loan programs for Foreign Investors will benefit local real estate markets and the economy in several ways.
- More buyers will enter the local real estate markets absorbing many of the foreclosures that are plaguing neighborhoods.
- Requiring a minimum of 30% down will generate a large cash infusion for banks, increasing their ability to lend money.
- It will generate much needed tax revenues for local and state governments.
I am sure we could list numerous reasons as to why there should be loan programs for Foreign Investors but what I want to know is “why aren’t there any loan programs for Foreign Investors.” What am I missing?
{ 2 comments… read them below or add one }
It is very simple especially since the U.S. mortgage industry has gone to the credit score model:
1.) Foreign Investors have no credit history in the U.S. (i.e. no credit score)
2. Offshore Assets are difficult or impossible to verify to meet U.S. lending requirements and are subject to a high instance of fraud
3. There is little recourse against Foreign Investors ( that do not reside in the U.S.) in the event of a default
4. Added costs and difficulty in verifying that the Foreign Borrower and their funds are legal and legitimate (not associated to criminal or terrorist activities) in order to be in compliance with the Patriot Act and other anti-money laundering laws.
The first item is one of the major flaws to our entire loan system once we went to the credit scoring models because the credit bureaus, banks, mortgage lenders and regulators did not account for Foreign Investors who usually have no Social Security Number and no Credit History here in the U.S. which would be an added hassle and cost for them. With the demise of the Sub Prime industry so did the few loan programs that were available to Foreign Investors.
I have been investing in up state New York for 5 years, and its almost impossible to obtain finance due to the reasons set out by Michael, I did manage to secure one loan about 3 years ago, for our group with the view for more to follow, we were able to verify our credit rating, income etc in Australia, but subsequent loans were rejected due to cold feet by bank management.
I would think in todays financial climate , it would be impossible and probably a waste of good time to chase finance. All of our clients use cash, its not an ideal situation, but the returns gererally make it bearable.
The patriot act is 300 pages long, I have read most of it, to be able to debate the issue over the last 4 years with the American banking industry, given our close ties between our countries I find the American Banking industry to be a tad paranoid.
John Roberts