This Land Is Not Your Land …

Amidst the changes adopted to Florida statutes, Chinese citizens with non-tourist visas are restricted to owning one home and/or less than two acres, which must be at least five miles from critical infrastructure. Citizens from the aforementioned countries who are not lawful, permanent U.S. residents are prohibited from real estate ownership altogether.

Foreign principals who acquire agricultural land on or after July 1 may not buy more, must register with the state, and then sell, transfer, or otherwise divest themselves of the property within three years.

Impact To MLOs

If it was just borrowers at risk of violating Florida law, this article wouldn’t need to be written. Lenders and mortgage loan officers who assist banned buyers are subject to criminal penalties, and the state has the right to seize property improperly obtained by foreign nationals.

“We’re going to prevent ourselves from making loans that break the law; that’s my most important goal,” says Robert Senko, president of ACC Mortgage, a 24-year-old non-QM lender.

Watch it on The Interest:The Future Of The Agent

Florida is among ACC’s top three states for loan volume, offering bank statement loans, along with buyer and refinancing options for foreign nationals and Individual Taxpayer Identification Number (ITIN) holders. However, foreign nationals represent just 5% of ACC’s loan volume countrywide.

“I’m not sure it’s going to be a massive needle mover,” Senko says of the new law. “To me it feels more symbolic politically. I don’t anticipate it hurting our business.”

Most non-QM lenders have programs for foreign nationals, while prime lenders typically only offer the option to select borrowers with high net worth who they deem to be low risk.

Wholesale lender LoanStream does a large loan business in Florida, according to EVP of Non-QM and Jumbo Mortgage Will Fisher.

“This will definitely have an impact; how big of an impact is yet to be seen,” Fisher says. “The one thing we have to be smart about is, do we want to stifle investment in the United States? The one thing that’s been nice about allowing foreign investment is they pick up the slack when our economy isn’t so healthy here, and we don’t have anybody to invest.”

A Will Finds A Way Around

As far as banned buyers looking to skirt the books, lenders will have to remain adamant.

“Folks buy stuff with LLCs or commercially; where there’s a will there’s a way,” Senko says. “If they have an American friend who buys a property, they could probably work behind the scenes to secure that property if they wanted to.”

ACC requires personal guarantees, passports and other special measures of its foreign clients.

“I’m sure there will be some challenges to it, but our system will flag it,” Senko adds.

LoanStream also has various tools to vet potential borrowers.

“For us if we’re going to do a foreign national borrower they need to have U.S.-based credit,” Fisher says. “I think that right there is going to be a filter for us to see their background activities in the country where they’ve been working and what they’ve been doing.”

Reviewing the fine print of the new statutes and adjusting business dealings accordingly will be a priority for lenders going forward.

“I think there’s going to be a gestation period for everyone,” Fisher says. “The mortgage industry is very reactionary.”

The Law Of The Land?

The Florida Asian American Justice Alliance (FAAJA) is working to prove the legislation is unconstitutional, while proponents condone state officials’ decision to limit foreign investments on American soil.

Opponents say the law violates the Department of Housing and Urban Development’s (HUD) Fair Housing Act of 1968, which prohibits discrimination in the sale, rental, or financing of homes because of race, color, national origin, religion, sex, familial status, or disability.

Congressional Asian Pacific American Caucus (CAPAC) Chair Rep. Judy Chu (CA-28) was “outraged” by the signing, which she called in a May 15 statement, “the latest state-level effort to restrict the property ownership of Chinese home seekers, who are aspiring small business owners, students, and families seeking to build better lives for themselves here in America.”

Several bills seeking to limit or prohibit foreign investment in the U.S. have been introduced at the federal level in recent years, but none have passed.

“If the federal regulators determine the same (as Florida) then I think that becomes more of a bigger issue than a state-specific ruling,” Senko says. “At this point I’m not overly concerned unless the federal government makes it more prohibitive.”

Canada blamed a spike in home prices since 2020 on foreign buyers flooding the housing market. As a result, the Canadian government passed a law on Jan. 1 banning foreign investors from purchasing residential properties for two years. Exceptions were made for immigrants and non-citizen permanent residents.

For now, potential landowners who fall into one of the prohibited groups can still consider other regions in the U.S. besides Florida.

“Whether you’re Chinese or any ethnicity, you have an opportunity here in the U.S. to buy property as a foreign national,” Fisher says. “Don’t limit your markets; do what you consider best for you and your family.”