Life’s a Beach for Mexico Mortgage Real Estate Financing
September 2007
Why is Finance North America’s Mexico mortgage lending business growing?
With August bringing the closing of Greenpoint Mortgage and a 1,600 job cut at Accredited Home Lenders (not to mention Fannie Mae’s restructuring and a host of other mortgage industry-related troubles), it’s natural to wonder what Russ Schreier is doing right.
President of San Diego-based Finance North America, Schreier runs a company that focuses strictly on providing financing for Americans purchasing real estate in Mexico. Only in Mexico.
As the firm universally credited with providing mortgage financing to U.S. and Canadian citizens on real estate transactions in Mexico, Finance North America provides Mexico real estate financing for both Americans and Canadians for Mexico property-related purchases, Mexico mortgage refinancing, and construction. The twist is that FNA won’t touch anything north of the US/Mexican border.
“Real estate in Mexico is HUGE right now” reports Schreier. And with one American baby boomers hitting 60 every eight seconds, it’s easy to understand why. “Many of these people are experiencing the empty-nest syndrome” he says. “They’re traveling more, and they’re investing in vacation and retirement homes.”
Tequila Leads to Hangovers
It really isn’t surprising that so much investment is happening in Mexico now, given the political changes there over the past 13 years. Starting with 1994’s “Tequila Monday”, the Mexican economic crisis of 1994-95 left a devastating wave of economic chaos that resulted in a sudden 35% devaluation of the Mexican peso and Mexico's worst recession in 60 years.
Prior to this event, Mexican national security measures prevented foreign real estate investors from buying any land within 50 kilometers of the beach and 100 kilometers from any border.
Paying for available Mexico real estate was equally painful. “There were basically two options for anyone buying Mexico real estate. You could borrow money from a Mexican bank (which generally had higher interest rates than US bank loans) or you could pay cash. Most potential owners considered both options undesirable.” Schreier explains:
According to the National Association of Realtors, the government developed a program in 1973 (the fideicomiso trust) to encourage foreign investment. The purpose was to encourage foreigners to legally own property in Mexico. The trust could be renewed indefinitely, and was guaranteed by the Mexican constitution.
However, in 1993 the fideicomiso still wasn’t providing the desired results. Driven by NAFTA’s implementation, the foreign investment law was changed to permit Mexican corporations to acquire property (and be recognized as Mexican), even with 100% foreign capital.
Mr. Schreier and his associates then rocked the real estate world by financing 50-year trusts on land that otherwise wasn’t being bought by non-Mexicans. “Our strategy of working through the Fideicomiso made it possible for foreigners to legally own, buy, sell and improve Mexican real estate.”
The revised fideicomiso provided the primary vehicle North Americans had been seeking to acquire inexpensive beachfront properties along Mexico’s 6,000+ miles of coastline, and enabled Schreier to begin servicing the demand for owning Mexico property. The combination of inexpensive property, perfect weather, proximity to US markets, and an ability to use financing tools that American consumers were comfortable with, proved such a temptation that millions crossed the border seeking that perfect home.
Things are looking up
Today, Mexico is rated one the best countries for investment opportunities in real estate growth as well as one of the safest for real estate investments. Foreigners can own coastline land anywhere in Mexico. Foreign land owners and homeowners enjoy rights of ownership protected by the Mexican government.
Suddenly, new developments in locations as diverse as Baja, San Felipe, Acapulco and Cancun have been popping up as quickly as mushrooms after a rainstorm.
With property values rising significantly faster with Mexico real estate than in California markets, the trickle of buyers has become a torrent. Still, there are many worthwhile opportunities for the investor willing to do some homework and take a long-term view.
And with the ability to finance up to $5,000,000 with 30-year fixed or adjustable loan rates, you can bet you’ll also be talking to Russ Schreier before too long.
"My experience with Finance North America and buying real estate in Mexico went smoothly and I hope to do business with them again soon."
-C. Young, Real Estate Investor
