FINANCE: Company hopes to sell bundled mortgages to Wall Street
By Dan Beighley

Orange County Business Journal Staff

Anaheim-based Worldwide Lending LLC hopes to do $240 million in mortgages in the next year or so—just not here.

The company recently opened an office in Cabo San Lucas where it hopes to lend to Americans looking to buy homes in Mexico. Within five years, Worldwide hopes to open nearly 20 offices in Mexican resort towns.

“We want to bring American-style financing to Mexico,” President Ken Gertz said.

Gertz said his goal eventually is to sell mortgages bundled as investments to Wall Street, a market that’s largely dried up after the national mortgage meltdown.

Foreign lenders long have struggled with bureaucratic tangles and trust issues in Mexico.

Worldwide hopes to minimize some of that by lending directly from its own credit line—which is extended from an undisclosed source—according to John Woodruff, the chief operating officer and a 10-year veteran of the country’s housing market.

Worldwide is looking to work with developers to bring in borrowers. The company has eight employees and doesn’t plan to build up a big sales force.

Gaining Trust

The biggest challenge is gaining the trust of developers who’ve been burned by mortgage brokers, said Gertz, a lawyer and real estate broker.

“We’re fighting to have credibility,” he said.

Gertz said he doesn’t fear competition from Mexican banks since they tend to charge interest rates a couple of percentage points higher than what he’s offering.

A typical Worldwide loan will be 30 years with a fixed rate of 8.5% to 8.75%, he said.

The average loan is expected to be about $1.3 million. Loans of $100,000 will be offered for people buying timeshares, he said.

Worldwide plans to work with borrowers with strong credit histories. They’ll be required to put down at least 20% of the value of a home, he said.

International Law

Many U.S. lenders avoid Mexico due to difficulties in working with international law to collect on bad loans.

Borrowers also have reason to fear.

In 2000, residents of Baja Beach and Tennis Club near Ensenada were ousted from their homes when Mexico’s Supreme Court ruled they were on land protected by an agreement that dated back to Aztecan rule.

The mostly American retirees who were forced off the property left behind homes that cost hundreds of thousands of dollars.

“In Mexico, it used to be Americans would go down, pay cash and never pay attention to the law,” Woodruff said.

American title insurers operating in Mexico, including Santa Ana-based First American Corp. and Houston-based Stewart Title Guaranty Co., have cut some of that risk.

New York-based investment bank Lehman Brothers Holdings Inc. is taking a look at lending in Mexico after buying a unit of Fort Washington, Pa.-based GMAC Mortgage LLC that specializes in the market.