Lenders remain wary of real estate investors

Cupertino accountant Richard Smith wants to buy a few bank-repossessed houses in Antioch and Brentwood priced at about $200,000 and rent them out. He can make down payments of about 30 percent, and can afford the mortgage payments. But he can’t find a bank who will make him the loans.

“I’m a very active investor, I’m self-employed with a solid income, and every one of my properties have positive cash flow,” said Smith, who has been buying rentals in California and Texas for 30 years. “I’ve never had a problem getting a loan. All of a sudden I’ve just run into a solid wall.”

The problem? Few if any lenders these days will make loans to those who already have four or more mortgages. Smith has about 100 current mortgages, he said.

Banks’ new restrictions on the number of mortgages available to borrowers won’t bother typical home buyers. But it’s hobbling people like Smith who invest in rental properties, and could even prolong California’s housing slump, some observers say. That’s because investors are among the most likely buyers for many of the bank-owned foreclosures now lingering on the market in the state’s inland valleys.

“If we can’t participate, we can’t burn through these inventories and help the market correct,” said Geraldine Barry, president of the San Jose Real Estate Investment Association and a friend of Smith’s. More often lately, she said, “What I’m hearing from our members now is, “I have a deal; I can’t get money’.”

Lenders remain wary of real estate investors
by Sue McAllister | Mercury News