The Notorious 120% LTV Mortgage Is Back
By Tyler Durden
Back at the height of the US housing bubble, when various subprime mortgage originators were glad to hand out NINJA mortgages, some went so far to give the debtor more money than they needed for a house purchase, with the assumption that any residual may go to help fixing up the house in advance of a flip. These were the infamous 100%+ LTV loans, where the bank would hand over more cash than the value of the actual property. This worked for a few years – as long as the value of the property was rising fast enough, and could be flipped promptly to willing buyers it wasn’t a problem. However, once the housing bubble burst, this particular type of loans disappeared from the US landscape, and as a result of new mortgage guidelines it will unlikely be making a return any time soon.
However, with China desperate to reflate its once-burst housing bubble (as every other bubble including stocks, bonds, and yes – even rebar – has burst) and with no regulators to oversee the insanity in the local housing market, it means that the infamous 120% LTV mortgage has finally resurfaced. As SCMP reports, Sun Hung Kai Properties Ltd., Hong Kong’s largest developer surprised the market on Wednesday by offering an unprecedented home loan worth as much as 120% of the flat value without the need to submit income proof in order to woo buyers for its new project in Yuen Long.
Buyers of SHKP’s Park Yoho Venezia who opt for the “King’s Key 120” scheme will receive a three-year financing loan up to 120 per cent of the flat’s value, much higher than the standard bank mortgage ceiling of 60 per cent for flats below HK$10 million, and 50 per cent for those more than HK$10 million.
“Developers are basically lending money to buyers to purchase their units. It is an obvious sign that developers want to speed up sales. If they do not act fast now, they may have to sell at a price lower than today,” said Nicole Wong, CLSA regional head of property research. She said other developers with projects in nearby areas would be forced to follow suit to provide similar home loan packages in a fight to secure buyers.
A general view of Park Yoho Venezia at 18 Castle Peak Road, Yuen Long. Photo: Sam Tsang
“It is the most aggressive plan I’ve ever seen in the market,” said Sammy Po, chief executive at Midland Realty’s residential department. “During the last market doldrums more than 10 years ago, developers provided home loan of 110 per cent of the flat value, even to first home buyers.”
Now it is 120%. Do the math.
However, there is a small catch: the offer only applies to buyers who already own an apartment with value no less than 70% of the would-be purchase price of the Park Yoho Venezia flat. The loans would be provided by SHKP’s finance company which is not subject to regulatory supervision by the …read more
Source: The Notorious 120% LTV Mortgage Is Back
