Is Trump's new ban on large institutional investors missing the mark?
The recent executive order signed by President Donald Trump to ban large, institutional investors from buying single-family properties has brought mixed opinions across the mortgage space.
While lower demand in markets will be better for owner-occupant buyers, others question how large an institutional investor presence there is in most parts of the country.
One mortgage executive believes that people buying investment properties are largely small investors, and that the ban likely won’t have as big an impact.
Jessica Bluj (pictured top), president of the mortgage division at American Pride Bank, said the most important thing in the housing market is that more homes need to be built and made available to owner-occupiers.
“I think new construction is obviously great,” Bluj told Mortgage Professional America. “There's just such a lack of homes nowadays that people really have to look outside the box. We see people doing that every day. I think building new construction in some of these markets is a great way to do that. But the other key is to make sure that we give people the opportunity to be able to do these sorts of things before investors.”
Regular people, not tycoons
Bluj said many people have misconceptions about what a modern mortgage investor looks like. She said the perception of who investors are has changed from a time when it was full of mega-investors before the 2008 housing collapse to what it is today.
“In my opinion, what that investor looks like today is completely different than what it did even 10 to 15 years ago,” Bluj said. “Ten to 15 years ago, you picture a real estate investor, and it's this real estate tycoon that owns all these properties. The reality is, nowadays, people who are buying these investment properties are just regular people who are looking to build generational wealth for their families.”
Some of these smaller investors may own a handful of properties, while others may be looking to purchase their first investment property. Either way, they are hardly the large, institutional investors impacted by the recent ban.
“We see people who are getting into investment properties,” she said. “Maybe they are buying their first investment property, or maybe they're buying their second investment property. They're just regular people who are looking to invest in real estate. Being able to afford these people the opportunity to build that type of generational wealth and buy investment properties that in the past would only be available to your professional real estate investor, I think, is also super important.”
Building your business
For brokers looking to work with smaller investors, it is important to find a strong lender partner to help finance these loans. Bluj said this also helps brokers partner directly with builders, expanding future loan opportunities.
“It’s critical, especially in a construction environment where there are so few lenders out there, to find a lender that can do construction loans,” she said. “What we've also seen is this is such a great way for brokers to build their book of business by partnering also with the builders. A lot of times, with these construction loans, the actual construction process starts with the consumer reaching out to the builder.
“They go to the builder, and they say, ‘Hey, I want to build a custom home,’ or they have a relationship with the builder. The builder is often the one sending the customer to the banks and saying, ‘Hey, listen, I have a customer who needs a construction loan.’”
Construction loans are an area where non-QM lenders have picked up business after more traditional banks have been passing on these loans. Bluj also notes it allows brokers to work with more types of customers, like those who are not W-2 borrowers.
“One of the things that we've had in the last few months is the amount of excitement in the builder community for these non-QM options that really help self-employed customers,” she said. “We've seen such an outreach from builders. A lot of times, banks don't really understand the product, with regular, traditional, conventional underwriters trying to underwrite a non-QM loan.”
The goal for brokers and lenders is to make the process as smooth as possible, especially when investors are looking to get new construction started.
“It's a completely different loan, and so that's when you get frustration,” Bluj said. “You get brokers that are trying to get a loan through. The operations team doesn't understand the product, and it's a nightmare. I do believe that's why a lot of people stay away from it. It's a very niche area, and you really need that experience level to do it right.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
