The residential mortgage meltdown in the United States not only has devalued investors’ significant assets but it has stymied their ability to create and explore potential future business.

New York-based Lehman Brothers Resort Home Lending abruptly ended its four-month entry into the Mexican and Costa Rican mortgage markets even as many destinations in those two countries continue to appreciate and draw second-home, retirement and investment buyers.

"While there is a lot of potential there, the international side wasn’t even a blip on Lehman’s radar," one analyst said. "When you compare it to the overall picture the company had to consider, international mortgages were nothing."

According to Bloomberg News, Lehman recently suffered its largest loss in the company’s 158-year history. In the third quarter ending Aug. 31, the investment bank reportedly wrote down $5.6 billion in residential and commercial real estate and disclosed a preliminary net loss of $3.9 billion for the quarter. Two weeks later, Lehman announced it would file for bankruptcy protection.

Lehman’s latest troubles were publicized on Sept. 11, exactly seven years after the terrorist attacks stung the world and nearly destroyed the company’s headquarters across the street from New York’s World Trade Center. Lehman’s Resort Home Lending group had planned to start doing business in Canada, the United Kingdom, Panama and the Dominican Republic this month. Instead, it closed up shop, and the parent company’s challenges continue to make international headlines.

GMAC was the first national lender to introduce a 30-year, fixed-rate product south of the border but pulled out of Mexico late last summer when the U.S. mortgage market meltdown began to influence international partner companies. Lehman Brothers purchased some of GMAC’s Mexico back-office operation late last year.

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Wachovia Bank also has launched a program that enables the bank to purchase vacation-home loans made in Mexico. The vacation-home origination process is designed to look and feel like the loan origination practices in the United States, according to Wachovia.

The lending community is not the only group to have slowed its efforts south of the border. Some developers in Mexico have been relying solely on consumer down payments to build their projects. Those projects have been put on hold until the U.S. market rebounds. The developments that are succeeding are those that have other money to build and promote.

"In a down market, you either double-down or get out," said Dan Bryant, a veteran lender and analyst of the Mexican second-home market. "Fortunes can be made in a down market, and now is the time to shine. The developers who step up and find other sources of money to complete well-planned projects will get the buyers — now and when the market comes back."

Underfunded projects and unscrupulous developers in popular drive-in areas like Puerto Penasco at the northernmost point of the Sea of Cortes and at a few oceanfront buildings on the northern Baja Peninsula have lenders spending more time on analysis and research before electing to approve permanent financing.

To get even more valuable advice from Tom, visit his Second Home Center.

***

What’s your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.

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