House Beat

Jun 11 2009 3:45PM | Permalink | Email this | Comments (0) |
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By Paul Deffenbaugh

Professional Builder columnist, John Rymer, is spending June doing sales training for a home builder in Moscow. He will be posting regular updates and observations on this blog.

The financing of homes in Russia has no national agencies, such as FNMA or FHA. Builders and developers must negotiate with banks on an ad hock basis to bring financing to their customers and rates float according to the market. The result is that interest rates on home loans have soared since last fall as banks believed that home loans deserved a far greater risk premium. Those able to get a loan ( a minimum of 25% down payment, and more typically a 50% down payment) now find they have interest rates in the low teens! In addition, banks were known to cut off credit to customers whose homes were already under construction and had executed mortgage agreements. As a positive note, because so much equity is required to purchase a home, lower home prices in Russia will not produce the kind of defaults we have seen in the US.

While builders often complain about the state of the US mortgage process and changing qualifying standards that hinder clear qualification standards, a look at other countries such as Russia, shows that while our mortgage process is far from perfect, we still have a lot to be thankful for.