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November 30, 2012

Things to know about financing U.S. property for foreign nationals

Are you a foreign national looking to buy real estate in the U.S.? Or are you a real estate broker who wants to represent such buyers? Here is some basic information you will want to know about financing your purchase.

  • Residency
    • A tourist, on a tourist visa, can finance up to:
      • 70% LTV or $1.5 million loan for 2nd home
      • 60% LTV or $3 million loan for 2nd Home
      • 50% LTV for investment property
    • For a foreign national who just moved to the U.S. from another country for new job here in the U.S., with a work visa can get home financing up to:
      • 75% LTV or $1.5 million, OR
      • 60% LTV up to $3 million
  •  Credit History
    • A few banks (e.g., HSBC) have the ability to pull credit in multiple countries worldwide. A buyer must work with one of these lenders to qualify for a U.S. mortgage using foreign credit.
  •  Income
    • For a salaried foreign national buyer, often an international bank accepts a letter from the buyer’s employer confirming buyer’s position, profession, year-to-date income and recent 2 years’ income history. 
    • For a self-employed buyer, a bank often accepts a certified letter from an attorney or public accountant confirming buyer’s company profile, position, year-to-date income and recent 2 years income history.
    • If the foreign national just started a job in the U.S., a bank may accept a copy of the U.S. Job Offer Letter at the time of loan application, with 30 days paystubs prior to loan closing as income qualification.
  •  Assets
    • A foreign national can use a gift from their parents to buy a home, BUT the amount may be limited by the lender, and/or there may be a lender requirement that the buyer can meet the closing costs and reserve requirements to make the purchase. 
  • Refinance
    • A foreign national who pays cash for a property at closing may want to immediately to a cash-out refinance (sometimes called a “Replenishment loan”). This is possible, but some lenders may require a 6 month holding period, while a few (HSBC) will do it as soon as escrow is closed.
 Loan guidelines courtesy of HSBC.

September 19, 2012

The fox is guarding the hen house.

After attending the Five Star Distressed Property Conference this month, here are the key points that I picked up from various meetings, panels and interviews…

  •       Lenders are not planning on selling their vast portfolios of REO homes by putting them on the market, but are now selling them in large portfolios to Wall Street hedge funds. One of the most recent sales was conducted by Bank of America of an estimated 1200-1500 homes, that was bought in a bidding war between 6 hedge fund type buyers that resulted in the portfolio being sold for 95+% of “BPO” value. This is important for a few specific reasons:
    •  It’s been my experience that BPO’s (Broker Pricing Opinions) frequently come in over 10-15% higher than the actual market value. It’s like relying on Zillow’s Zestimates for your property valuation. If the BPO’s are this far off, it means that the winning hedge fund buyer just paid as much as 111+% of market value for these homes. Do the investors in the hedge fund know this? I doubt it. These buyers are not planning on selling these homes, but rather cleaning them up and renting them out. It’s a long term play, betting that they have timed the recovery of the real estate market and that these properties will appreciate significantly over the next five years, allowing them to cash in on the market. Not a bad idea…but look what this does to the local markets, where as much as 40% of their housing is already rentals…and now we add another bunch of homes into the rental inventory. 
    • You can expect rental rates, as subsequently the rental property returns to drop in these areas where they suddenly have an influx of rental inventory. How can we be so naïve as to forget what just happened to Phoenix? Aren’t we about to create this problem all over again? 
    • The small individual investors, who have been buying foreclosure properties, fixing them up, and selling them at a reasonable pace that the markets are clearly absorbing, could find themselves out of the game with this new portfolio strategy.
    • Lenders are outsourcing more and more of their control of REO properties to asset managers and property managers, turning them into rentals. These lenders have suddenly become the landlord…in a BIG way…. In the U.S. It makes you wonder…If foreign buyers are scooping up our properties and lenders are now holding them, instead of selling them..what do they know that we don’t?
  • Chase and Wells Fargo are no longer accepting applications by real estate agents to potentially be approved as REO agents to sell their properties. ALLEGEDLY. Apparently, if a real estate agent walks into the local Chase branch, and brings them 2-3 loans, that agent can now be approved as an REO agent by Chase. Wow. Talk about a RESPA violation. You won’t approve me, unless I bring you money/borrowers? Hmm.
  •       Nationstar short sale department, which bought a huge portfolio of non-performing loans from Aurora in July, is now quoting 4-6 months for short sale approval. Wasn’t that what lenders were doing two years ago?
  • Foreclosure time frames are extending, because of the preference by lenders to encourage short sales. The state with the longest foreclosure process is currently New York, which is averaging 4-5 years to complete a foreclosure. On the other side of the country, California is sitting with an average of 1.5 years.
  • The big investment opportunity is in Non-Performing Loans, though the average investor may not get a chance to really play in this arena.
  • There are still some lenders and asset managers who are followers of Machiavellian tactics. One such person, in an open forum to a large crowd of real estate brokers, investors, asset managers and lenders, said “You need to remember it is not your job to moralize, it is your job to profitize.”

So, I say to you…the fox is guarding the hen house.

Nationstar… Debacle of Incompetence…or outright fraud? You decide.

In my normal life, I’m a pretty upbeat fellow. I work hard for my clients, try to do the right thing, and love to keep people informed about the most recent activities out there in real estate. But I just can’t seem to get past the complete stupidity, or cunning and Machiavellian actions of various lenders. So…move over in the bad-boy corner, Wells…make room for NationStar.

In this story, our borrower/short seller had lost her job two years ago, which eventually led to her inability to make payments on her condo. After three attempts to modify the loan with Aurora (Shouldn’t they also be wearing their own dunce cap?), she finally decided to short sale the property. A buyer presents and offer back in April and the seller accepts it. We submit the seller/borrower’s complete short sale…twice…to Aurora. The Bank does its BPO. They tell us that the package is complete and that it is simply at the negotiator’s desk for final approval….That was the first week of June….Two weeks later, they advise me that they are still awaiting approval….BUT…wait for it…..

The truth is that they have sold this loan to NationStar and they have frozen the short sale process because the loan will be transferred to NationStar on July 1. WHAT?? So….NationStar interfered with the borrower’s business transaction that was already in place that should have been done by the end of June?? I’m just sayin….

ENTER NationStar. They have acquired so many loans on July 1, that they post an announcement on their website that they won’t be returning calls, or talking to anyone regarding a loan until after the 7th of July. Ok…I can understand that your greedy purchase now results in thousands of people being put off, postponed and losing money…but I digress…. Once contact is finally achieved, NationStar takes four weeks to finally re-engage in the short sales process. They start by requiring the borrower to submit a new package. What??? So…you’re not making us start over….but you are. Four weeks after that, the BPO is ordered and now in mid-September, some 6 months later, we are back at the same place we were in the middle of June, that of having the lender (now Nationstar) acknowledge that the entire package is in, two BPO’s have been completed and we are in final underwriting approval stage…but….wait for it…
The short sale is unilaterally cancelled by Nationstar in the online Equator system. Cancelled. No more. Gone. I reach out to the negotiator, who advises me in an email that the short sale was cancelled because the borrower/seller has applied for a loan modification. WHAT? WHO DID WHAT? WHEN?  And so, I reach out to the borrower/seller and…imagine this…she never requested anything from NationStar! They had fraudulently claimed a loan mod application..when there was none. So what happened? on..

I come to find out that, in the course of the short sale approval, NationStar calls the borrower and offers that she could qualify for a HAFA short sale, which could get her some funds at closing, but she would first have to go through and be declined on a loan mod. BUT…the first lender turned her down for a loan mod multiple times. Why would they put this borrower in further financial peril with her HOA, further damage her credit report? Endanger a business transaction? Could it be that they are looking for federal funds for taking the HAFA loan mod app?? Hmm..I wonder.

But the most ironic part of all of this…is that the initial lender, Aurora loan, tried to pull the EXACT same scam when we first applied for the initial short sale months ago, after turning the borrower down on multiple loan modification attempts.  Wow.