Financing in Vallarta

At the recent PV AMPI Chapter monthly meeting Terence Reilly of MexLend spoke about how financing has been going for his and other mortgage brokers and lenders in the Puerto Vallarta area. He said that in previous years, the market had been driven by people taking out home equity loans (HELOCS) on their homes in the USA or Canada, or cashing in stocks. In today’s market, this is no longer a valid option. So financing in Mexico has become more popular.

In 2007 his company did $20 million in real estate transactions. However, in 2008 they more than doubled their business with $47 million in transactions. The industry has lost some lenders, but also picked up some new one’s, such as Deutche Bank. One lender has a program to lend against your stock portfolio – very creative. And he mentioned that they can now do loans for property owners that want to have the property in a corporation.

Good news is that in 2008 only two foreclosures were reported. This is primarily because there just haven’t been many loans that could be foreclosed on! But that’s certainly good to see against what’s happening north of the border.

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One Response to Financing in Vallarta

  1. johnlifestyles says:

    Posted by Terence Reilly:
    Just to clarify, the reason that there will be far fewer defaults or foreclosures in our market is not because there are fewer loans, but because
    underwriting guidelines are very conservative. I should have been more clear on that. In the interest of brevity, sometimes I move too quickly.

    Credit scores must be above 680, income must be verified (and is looked at closely), and the debt to income ratios are
    extremely conservative. So no client received a loan that did not meet these stringent guidelines…therefore fewer defaults.
    These guidelines mirror those of lending in the US during the 1960´s and 70´s. It is this stringency that limits the amount
    of clients that we can service, but on the positive side, helps to maintain market stability. Lenders are currently returning to this criteria
    in the States.

    Prior to 2000, foreclosures in the US were at a minimum because of the same standards that have existed from the start here in Mexico.
    It is precisely this reason that mortgage backed securities have previously been known as the most conservative and safe investments.

    Conservative mortgages have historically been a tool to build wealth through equity in the US and most of us are the beneficiaries of
    that system. The current global credit unraveling is a result of ridiculously lax lending requirements started during the 2000´s to push
    the housing market in the US. This led to rampant speculation by mortgagees that had no stake in the properties and could simply
    not afford them. This combined with the deregulation of banks and Wallstreet has brought us to this dangerous time.

    In our market, what we do not know is how many people who took advantage of those lax standards to get cash in the US and brought it down
    to purchase ¨¨all cash¨¨ here in Mexico are now in trouble back home and need to sell their properties quickly.
    It is my hope and belief that these distressed sellers will not effect prices in Mexico.

    I mentioned our numbers at the AMPI meeting soley as an example of the increase of client interest in mortgages. If one brokerage is involved in
    moving that amount of housing, then combined with other brokers and direct lending, I suspect that we are far more important to the market than has
    been noted.

    The huge difference between the quality of brokers lies in the direct correlation of those who remain actively involved in the closing process and
    those that merely submit files to the banks. To be successful in Mexico, a broker must move far beyond the normal practices in the US, and
    be actively involved in the entire process through to the closing. The cost of this involvement brings profit margins on individual loans to a
    minimum. This absolutely weeds out the weak brokers from those that can get the job done. There simply are not that many good brokers in
    our market. Unfortunately, this reflects on the entire industry and not just on the brokers who do not get the job done.

    It is my hope (and current experience) that developers and realtors continue to realize how beneficial financing can be to a market in broadening
    their buyer pools and thereby support market prices. During these globally challenging times, all hands are required on deck and all tools
    available to sell these properties must be fully embraced and promoted.

    I was asked to address a very limited and specific topic for AMPI and did so not as a commercial for Mexlend, but as a
    lending industry representative. David and I speak often at different events in this capacity. I feel it is important to be able to resist the temptation to
    promote our company and step forward to address issues that effect the industry as a whole.

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