Despite what some might sell, TICs financed with fractional (or “individual”) loans are not substantively the same as condominiums. While fractional financing does mitigate a large portion of the commingled financial risk associated with a TIC purchase, it doesn’t address our larger concern of liquidity in terms of access to equity (no HELOCs here) or major lenders when it comes time to liquidate (not everyone wants – or will qualify – to borrow from a boutique bank).
That being said, and while we haven’t yet confirmed it, according to a trusted plugged-in tipster Wells Fargo is about to roll out fractional TIC financing.
This would be a good thing in many ways, in my opinion. Competition from a major bank should (in theory) reduce interest rates. Currently, loan standards haven’t changed for TIC loans (always been tough), so it’s been just as easy/hard to get one as it’s always been. That has significantly sheltered this small niche market from the larger mortgage chaos, and it would be nice to keep it that way.
It makes sense that the larger banks would get in on the act now that the boutique lenders have tested the waters. We’ve now had two years’ experience with these fractional loans in what is arguably the worst real estate market in recent history – and the lenders who have made these loans are sitting pretty. Anyway, the more, the merrier!
Watch for Chris Daly to come up with some sort of counter TIC measure once big banks start portfolioing (is that really a word?) fractional TIC loans.
Yeah, you can bet Chris Daly is going to put forward some type of proposition to create a TIC lottery.
Not going to happen on the daly front. McTIC already shot down in the courts. TIC is a form of ownership, nothing to do with 4 unit buildings in SF. A couple smart lawyers in SF used the TIC concept to get around a condo restriction. Just like they used the TIC concept to facilitate 1031 exchanges. Pretty cool in my book.
Yeah, this is great news! The lack of HELOC is fine enough with me, but would like the ability to refinance or sell to become more liquid.
Maybe a ballot measure to funnel Billions to TIC borrowers — like the measure Daly introduced yesterday that would require The City to spend $2.7 BILLION on below-market-rate housing over the next 15 years.
This is the beauty of the free market in action. Much as the concept of private markets mortifies delicate progressive sensibilities, the fact is that people want to own homes in San Francisco. TICs and fractional loans are the perfect market response to a regulatory and land-use regime that tries to frustate that desire at every turn. Go, Wells Fargo!
WF apparently figured out these are the only loans that are and will perform well in SF!
With Thornburg going under maybe we’ll refi with Wells if the rates are decent.
Free markets are for chumps. Everyone knows this market is going to get flooded worse than Iowa with “targeted housing stimulus legislation.”
http://www.housingwire.com/2008/06/17/home-builders-confidence-touches-record-low-calls-for-congressional-action-mount/