Considering Real Estate South of the Border…

Are you considering investing in real estate south of the border? Here’s a little backgrounder.

It’s been concluded that borrowing related to real estate primarily fueled the credit bubble in the U.S.

It is my understanding that as homeowners defaulted on their mortgage loans, the financial institutions then devolved many of their losses (and responsibilities) to Fannie Mae and Freddie Mac.

During all this time financial institutions had been providing mortgages willy-nilly, they also signed contractual representations assuring that if any fraudulent documentation or faulty underwriting is found in their files, they agree to buy the loans back.

As mortgage delinquencies in the U.S. continue to rise, the Federal Housing Finance Agency is investigating transactions, known as “poorly serviced loans”, for alleged irregularities in bank foreclosure documents, such as over-stated and under-stated values for income and/or property being used for the same case.

As a result FHFA is aggressively pursuing the institutions responsible, and buy backs are being demanded where during examination illegitimate transactions are being found.

A new industry has been spawned by the federal agencies, and opportunity knocks for former bank employees capable of analyzing banking records in search of the aforementioned irregularities. It’s probably an understatement but I don’t think there will be much loyalty shown to the banks by ex-employees. ;-J

Where does it go from here?

It seems to me that U.S. lawyers are also going to be kept busy, which will likely compromise many chances of reasonable restitution, and inevitably the taxpayer will end up paying the bill.

While there are many spots where properties sit vacant due to overbuilding and foreclosures, the U.S. is not for sale carte blanche, and what this all means for a real estate recovery south of the border will depend on the local circumstances.

So if you’re considering investing in U.S. real estate, beware of the nationwide prognosticators. Macro information can only be relied upon to a limited degree, and this is one particularly good reason why you should always seek out a local expert, and not an “Everywhere Specialist”. You’ll also want to know the tax implications of a second home.

If you’d like to be introduced to a local expert south of the border for assistance with your due diligence I’m directly networked with hundreds, so give me a call or send me an email.

2 thoughts on “Considering Real Estate South of the Border…”

  1. “over-stated and under-stated values for income”

    I believe income mortgage qualification is reasonably substantiated in Canada, so the chances of abuse are less likely, although with BoC governor Mark Carney continuing to voice his concerns about the big risks of little equity, perhaps more auditing will be done to close any loopholes.


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