Laredo National Bank’s newest mortgage program is targeting soon-to-be-retiring baby boomers who dream of owning resort property along Mexico’s beaches.
Since March the $4.1 billion-asset Texas bank has been offering mortgages in Mexico through a partnership with the Mexican mortgage company Banca Hipotecaria Nacional and Mexico’s Bancomer, which like Laredo National are owned by the Spanish banking giant Banco Bilbao Vizcaya Argentaria.
Though U.S. mortgage companies offer mortgages to Americans looking to buy second homes in Mexico, Laredo National is believed to be the first U.S.-based bank to do so. American banks have been reluctant to lend money for Mexican real estate because of unreliable foreclosure laws and the historic instability of the Mexican peso.
Laredo National hopes to make more loans and add customers through the program, said Betty Amador, a vice president with the bank.
“We want to be able to accommodate our customers and increase our mortgage portfolio,” she said. “We are trying to be one of the pioneers.”
Mexico’s land-ownership laws differ from the United States’. Foreigners can buy real estate in their own names throughout the country’s interior, but they can buy property only in Mexico’s prohibited zone, which is within 31 miles of its coastlines and 62 miles of its borders, through a type of trust called a fideicomiso, which is similar to a living trust in the United States.
The land must be held in trust through a Mexican bank, which is where Bancomer comes into the partnership. Bancomer will hold the trust for Laredo National at no charge to the American bank. Hipotecaria is developing leads for Laredo National, also at no charge, Ms. Amador said.
Traditional mortgage loans on Mexican real estate for U.S. citizens require large down payments, with high interest and long payment terms, and they are often cross-collateralized with U.S. real estate. Laredo National is offering loans for $100,000 or more with fixed interest rates and repayment terms ranging from 15 to 25 years. The loans are made in dollars, not pesos.
Among the handful of financial institutions providing mortgages to U.S. citizens are Conficasa Holdings and in Houston and Collateral International in Birmingham, Ala.
Conficasa, a wholesale broker, has been in the business since 1998 and started a pilot program with General Electric Co.’s GE Money Bank — an industrial loan bank in Utah — last year, said Amelia Murphy, a sales manager for the company. Ms. Murphy said Conficasa helps walk borrowers through the Mexican process, but doesn’t have a specific partner to hold the fideicomiso.
“We tell them how to and then they choose who they want to do that with,” she said.
Banco Bilbao, which has nearly $500 billion of assets, bought Laredo in early 2005 for about $850 million.
Sandra H. Salinas, a vice president with Laredo National, said the program creates a sort of one-stop shopping for those seeking a vacation property or home in Mexico.
“We take care of everything in Mexico — the fideicomiso, the appraisal, the notarios, where they go to close with a lawyer,” she said. “We have all of that already set up to make it easier for customers.”
Ms. Amador and Ms. Salinas have traveled to vacation hot spots around Mexico explaining the new product to developers and real estate agents who deal with potential buyers. The Laredo National program has gotten a good reception, Ms. Amador said, adding that the bank plans to close several mortgages this month.
“We’ve received a lot of phone inquiries and phone applications,” Ms. Amador said. “Our pipeline has increased because we received a lot of applications.”
