Bank to Offer Mexico Home Lending Program

Dennis S. Frank, the chief executive officer and chairman of Silvergate Bank in La Jolla, cites the recent clarification of trust laws and the increased prevalence of title insurance for Mexican property as the two major developments that have enabled his bank to announce the roll-out of its new Mexico home lending program in June.

For the last five years, infrastructure improvements to roads and a development boom in resort-style communities in the Los Cabos corridor , the 15- to 20-mile stretch reaching from San Jose del Cabo to Cabo San Lucas , have lured Frank to explore financing opportunities in Mexico. But he said he’s been working in earnest on developing Silvergate’s loan program for about 18 months.

Frank has liked what he’s seen so far. He was so intrigued, in fact, that three months ago Frank said he purchased a house for himself in San Jose del Cabo.

On June 15, Silvergate Bank is set to launch its Mexico lending program, which will offer financing for homes owned by U.S. citizens in the Cabo San Lucas area of Baja California. Silvergate will become one of only three or four U.S. lending institutions to offer such a product.

Frank’s brother, Derek Eisele, the managing director and vice chairman of the board for Silvergate, will head the program.

The terms of the loans have already been established and look something like this: The standard loans available will have a maximum loan to value of 50 percent , in other words, the largest loan will be equivalent to 50 percent of the amount of the purchase price of the property , and with a 20-year term. The interest rate will equal the London Interbank Offered Rate, currently 3.4 percent plus 5.5 percent, and will adjust every six months. The origination fee will equal 1.5 percent of the loan amount, with a prepayment premium. The requirements for loan approval include verification of employment, income, cash and investments, according to the loan program highlights on Silvergate’s Web site.

Silvergate, which has its headquarters in La Jolla, operates branch offices in Dallas, Lancaster, Riverside and La Mesa, and has a loan production office in Richmond, Va. Its newest branch, in Houston, is set to open in mid-May. The bank has $550 million in assets and “deep roots in the capital markets,” according to Frank, who bought the bank in 1996.






Frank said in the beginning, Silvergate will market the product primarily out of Houston and San Diego.






“We plan to market where the collateral is from there, if we see demand in New York, Chicago or San Francisco, we can turn our attention to these markets.”

For now, Frank said there is no plan for working exclusively with any particular developers in the Cabo area. Instead, developers such as Newport Beach-based Koll Resorts International, the developer of Palmilla in Cabo San Lucas, are an example of the type of developer Frank said he could work with through the lending program.

In providing loans for properties in the Cabo area, Silvergate will be entering a market that remains largely untapped but one in which demand has been steadily increasing in recent years.

Frank sees enormous potential in Mexico. In the future, as mortgage products for Mexico become more fungible, Mexican mortgages will become just another “securitizable asset class, like credit cards have become in the U.S.,” according to Frank.

“Expanding home lending into Mexico is a natural extension for U.S. (mortgage) lenders,” said Frank. But, he added, “At this point, it is truly a puzzle down there a riddle to solve.”






Once Silvergate’s program is established, Frank said he is not ruling out plans to offer the loans in other areas of Baja California.

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Filling Up:

The Seaview Corporate Center in Sorrento Mesa, which traded hands last year for $92 million, achieved 96 percent occupancy after signing two new tenants for 24,106 square feet in deals announced on May 4.

In the first deal, T-Mobile, the wireless service provider with U.S. headquarters in Bellevue, Wash., leased 12,051 square feet of office space for 62 months for $1.7 million. In the second, PharmaNet, a Princeton, N.J.-based drug development firm, found a 12,055-square-foot space for its San Diego regional office. The 84-month lease was for $2.4 million.

The Seaview Corporate Center has three Class A office buildings totaling 340,287 square feet and a 12,780-square-foot biotechnology building.

Brokers in the San Diego office of Cushman