2007: A NEW AGE FOR COSTA RICA FINANCING

Costa Rica Financing Enviroment in Transition

The environment for financing real estate in Costa Rica, particularly for foreigners, has undergone a significant transformation over the last 18 months.  It continues to evolve rapidly as capital providers seek to leverage solid returns from low-risk borrowers in Costa Rica, a country with undisputed stability and a maturing real estate market. 

The Costa Rica banking environment has experienced significant consolidation in recent times as the globalization strategies of major international banks have made their way to the region.  The most significant examples have been the acquisition of Banex by HSBC, Banco Cuscatlan by Citicorp and Banco Interfin by Scotia Bank.  Though these acquisitions have yet to result in the true operational assimilation and integration of these local banks, planning and preliminary implementation for more integrated operations is well underway.  The strength, stability and characteristics of our market will drive further M&A activity in the banking sector.  We should also see local services expand from international banks, who have heretofore only maintained satellite Costa Rica offices as well as the entry of new international banks who've given Costa Rica priority within their international expansion plans.

Costa Rica Loans for Foreigners

It's been less than 2 years since residential loans became available to non-residents with terms resembling myriad conventional mortgage products offered by lenders in North America.  When Costa Rica Mortgage initiated its operational pilot and market test in early 2007, we were the only mortgage brokerage to be found on popular search engines such as "Google".  Though we take great pride in closing out 2007 as the only professional and independent mortgage brokerage operating in Costa Rica, 2007 has seen numerous entities enter the mortgage brokerage services marketplace. This past year has also seen the departure of several startup mortgage brokerages, claiming to provide financing through private funding sources as an alternative to institutional lenders.  Though some of these were successful in funding a small number of loans, the market is awash with reports of borrowers whose real estate acquisition plans were derailed by claims of "low documentation, easy process, and 30 year fixed rate" loans which never materialized.

The financing industry in Costa Rica has reached the early stages of maturation and there are now several lenders capable of providing residential financing for foreigners.  These are, however, early days and with the attractiveness of our real estate market, the downturn in the U.S. environment and CAFTA, the mortgage brokerage industry will see the entry of many new firms as the array of existing mortgage products grows exponentially over the next 3-5 years.

There are many U.S. and global-based financial institutions that have been targeting Costa Rica as a growth opportunity.  Several of these lenders announced plans throughout the year to start lending by the end of 2007.  Though most of them have experienced short-term setbacks, due to the US mortgage meltdown, we should expect to see several non-Costa Rica institutions enter the market as 2008 progresses.

Costa Rica Commercial Financing

For commercial financing, 2007 has seen the acceptance of Costa Rica as a prime opportunity market.  Many investment banks, private equity groups and hedge funds focused on offshore commercial real estate, closed their first Costa Rica transaction in 2007 and many of them are actively seeking to fund Costa Rica commercial real estate with both debt and equity as a significant component of their asset allocation strategy.  We work closely with many of these firms and they are very excited about funding projects in Costa Rica.

I was speechless, after working many years in the real estate market in Costa Rica, to find out that finally, someone had wised up and financing for foreigners was now available. All the clients I had to turn down with the horrific words: "sorry, there is no financing available for foreigners here", could now give Costa Rica another shot.  Life would become much simpler for me and for my clients. Or so I thought.

Once I got the news, I got on the phone, blasted out e-mails to all my clients, to let them know that now it was the time to come back, they could get a mortgage and finally jumpstart their dreams and goals. Alas, the news that hit me as awe inspiring, quickly turned into an bothersome oddessy.

Yes, it was true that now there were local lenders offering financing to my non Costa Rican clients, but unfortunately, they were really hard to deal with. From tons of paperwork (well, this is common anywhere), unclear requirements, day's becoming weeks and unresponsive loan reps, both my clients and I gave up fairly quickly (well, 2 months of trying to get a mortgage does not really seem to fit into the term "quickly").

 I tried to deal with several banks, but in all of them, instead of help, all I got was excuses as to why someone was not being approved or why it had been a month and I was still waiting for just a tiny glimpse of what was really going on. I still remember the tiresome words: "sir, I will probably have an answer for you tomorrow", and tomorrow became next month and still nothing.

 I started asking my peers around, and they reported that all over the place, the same problem was creeping up. Developers that had made great deals with local lenders regarding rates, lost plenty of sales because their clients were turned down after a month of paperwork, and for the one or two that did go through, the great rates seemed to vanish, or were suddenly faced with hundreds if not thousands of dollars in hidden costs not disclosed at the outset. My realtor colleagues were going through the same problems I was, and my clients not only got upset because I could do no more to help them but because their dreams were once again out of reach.

It was during this time of crisis that I suddenly ran into a small but rapidly expanding company that advertised themselves as an independent mortgage brokerage. Their ads included things like no application fees, good faith estimate, no closing surprises, choice of all products, persoalized service, etc, etc, etc. At this point, I was not ready to get all worked up once again, so I decided to take it easy and do my homework.

After a couple of days, some e-mails, reference checks and one or two calls, I was ready to give my clients a call once again.

Now, several months later, I have become a part of the Costa Rica Mortgage team. Why? Simple: here I can actually help people make their dreams come true.

A lot of things happened in the next few months, but that is a story for another time. As to how good that small brokerage company ended up being and how quickly it's grown? Well, all I can say is that I am now proud to be a member of the Costa Rica Mortgage team and many of my old clients who were looking for financing are now happily living their dreams in this shiny bit of tropical paradise called Costa Rica.

Though we personally serve all our clients who call or visit our San Jose headquarters with the highest professional standards, our team of Loan Consultants throughout Costa Rica, enables us to add value to our client's financing experience which cannot be delivered in a typical call-center environment.

All of our Loan Consultants are experienced mortgage professionals who live in Costa Rica. Their fundamental goal is to develop relationships which reward them with ongoing referral business. Many of our Loan Consultants have moved to Costa Rica specifically to pursue this opportunity and the realization of their dreams of relies solely on the satisfaction of their clients. They are both fluent in their local Costa Rica real estate segment and the details of all available residential financing products.

Aside from their technical proficiency as a Costa Rica financing specialist, a passion for Costa Rica and client service are prerequisites for joining our team. Unlike mortgage call center agents, who have often never been to Costa Rica or lack prior mortgage experience, they are earnestly committed to growing a business in their particular area of Costa Rica.

Throughout 2008, our monthly newsletters will feature one of our Loan Consultants.  We look forward to introducing many of them to you in the coming year.  We are always seeking to expand our Loan Consultant team with quality individuals who will enhance our brand equity and service our clients with the highest professional standards. We are always interested in qualified candidates seeking Costa Rica mortgage jobs.

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