Friday, July 15, 2005

E-Loan Individual TIC Interest Loans Announced

On July 13th, E-Loan announced that it will launch a new home financing product specifically targeted to the Tennancy In Common (TIC) niche.

The product, which is slated to launch August 2005, offers TIC partners individual financing for each separate interest in the property. This differs from the standard form of TIC financing, in which all partners must sign and be responsible for just one mortgage, and is met with both much excitement and many questions about how this will impact the San Francisco real estate market.

The excitement revolves in part around the fact that separate interest TIC loans will potentially lessen the risk involved in TIC ownership. TIC financing up to this point has been based on the collective financials of all parties combined, thus the risk has been that if one of the TIC partners’ financial situation changes, it would impact everyone involved in the partnership. Because TIC ownership has this high risk factor, in which some outside force may impact your ability to continue to finance and live in your home, TICs have typically sold at prices lower than other forms of housing.

Other excitement involves bypassing the strict and laborious process of the TIC-to-condominium conversion process. If the new individual loan option offered by E-Loan significantly reduces the risk factors involved in TIC ownership, then there will be little reason to bother with San Francisco’s condo conversion lottery (which allows only 200 TIC-to-condominium conversions per year). Additionally, with fewer buildings applying for the lottery, the pipeline for the condo conversion process, which at this point takes several years, could be reduced dramatically for those who still wish to convert.

There are concerns over the unknown, however. Tenant advocates are already worried about how this will impact the rental market. As the demand for housing continues to be stronger than supply, there are fears that large rental buildings will be sold for TIC conversion, forcing many tenants out of their homes but still unable to afford purchasing housing.

Concerns are also coming from interested homeowners, real estate professionals, and those in the mortgage market. Since Tenancys In Common by nature are interests in a percentage of a building, not a specific unit, many wonder how one partner’s failure to pay his or her individual mortgage will impact the remaining partners. Questions revolve around how E-Loan would handle foreclosing if one partner with individual financing were to default on a loan.

Obviously any person with interest in the San Francisco housing market will be watching with bated breath to see the new product’s impact. The entire City seems poised to take action in one direction or another based on how the first glimpse of individual TIC financing impacts the market. At Wednesday’s Homeownership Summit, sponsored by SFSOS, Plan C SF, Small Property Owner’s Association, the TIC Coalition and Coalition for Better Housing, Mayor Newsom and select members of the Board of Supervisors said they were watching developments with piqued interest.

Circle Bank has advised that it will have an individual interest TIC loan product, although it has not announced when the product will be available. A representative of Sterling Bank, present at Wednesday night’s Homeownership Summit, said the bank is weighing the option of individual TIC interest loans as well. We are sure to see other financial institutions working busily to present similar products.

Have more questions about trends in the housing market? Questions about selling or buying a home? Contact me today for honest, experienced answers.
Amy Blakeley, Realtor®
ablakeley at
(415) 296-2173 Direct


virtualdude said...

I just bought into a TIC and all of the owners can't WAIT for this new loan type to come out. We're hoping it will spike our property value in a way that would be similar, but to a lesser degree, how a condo conversion would spike the value. Other than that, we're getting ready for the Condo Lottery and setting down the info in the TIC Agreement.

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