International bank HSBC will stop providing mortgages to certain Chinese nationals buying properties in the United States, Mansion Global has learned.
The move, which was widely circulated on Chinese social media sites over the weekend, may be part of a larger crackdown on money laundering and repatriating assets.
HSBC will no longer make mortgage loans to those Chinese nationals holding B visas (the temporary visitors’ visa) if the majority of the national’s income and assets are maintained in China.
A spokesman for HSBC confirmed the shift to Mansion Global, saying “There is a policy change.”
A loan officer with a U.S.-based branch of HSBC, speaking on condition of anonymity, said she was notified of the move by her supervisor last Friday. “No new mortgage applications will be accepted, but the applications which have been submitted successfully will not be affected. ”
Yangying Zheng, another HSBC loan officer in New York City, further explained that only those B-visa Chinese citizens whose income and assets are primarily located in China will be affected.
“If you are applying under EB-5 [the Immigrant Investor Program] or hold permanent resident status from a third country, you will not be affected,” she said.
Zheng pointed out that the policy change is largely attributable to cooperative anti-corruption and anti-money laundering efforts by the U.S. and China. “Although it will affect HSBC’s bottom line, as a transnational financial institution, HSBC must place law above anything else.”
Sally Mak, CEO of New York Wealth Planning Group and a Certified Financial Planner, said this change has no major impact on the luxury real estate business: “Most luxury property buyers from China prefer all-cash transactions, thus they are not subject to U.S. mortgage regulations.” But if other Chinese banks follow suit, “It will have a long-term impact on the real estate industry,” she added.
Two weeks ago the U.S. government announced it would require all cash buyers of luxury properties to disclose their identity, putting an end to anonymous cash buying.
Not all banks are taking the same position as HSBC. Marco Sun, New York regional manager of Consumer Financing for the Industrial and Commercial Bank of China (ICBC), said there is no foreseeable change in their policy and the bank continues to issue mortgages to Chinese citizens with B visas. “Anti-money laundering and anti-corruption policies are not new. ICBC always holds to the highest standards and adheres to the regulatory policies set forth by the government,” said Sun.
A branch manager of California-based East West Bank, who preferred to remain anonymous, said that East West Bank has not made any changes in their loan-writing policy. They are still accepting applications from qualified foreigners regardless of visa status.
Investors have long realized that investment in cross-border real estate has distinct advantages over the stock market: The dearth of regulations has provided a relatively private way to transfer funds internationally. The real estate industry has been experiencing increasing pressure of late as the U.S. and Chinese governments are more strictly enforcing recent financial and regulatory policy changes.
Lin Pan, CEO of Long Island-based Lin Pan Realty Group, says that since 2015, she has seen a marked increase in the number of inquiries for mortgage loans. “Many of my Chinese clients have been complaining that it's harder than ever to find a legit way to transfer money from China to the U.S. Some have had to give up on purchasing a multi-million dollar property and settle for a home in the $1 million range or lower.”
“The rest are applying for mortgage loans only because they are not able to transfer all their funds to the U.S.,” she added.
Pan has been working busily to help her clients obtain mortgage loans from other financial institutions since she was notified of this policy change by an HSBC mortgage officer last Friday. “The regulatory policy will surely be tightened over time. I am now urging my clients to move faster,” she said.
Juan Chen of Kian Realty NYC said she has one client considering a mortgage loan from HSBC who will now “go all cash.”
"[The policy change from] HSBC will indeed affect the market, but not on a large scale. One reason is that most of my clients are all-cash buyers,” the Manhattan-based agent said. “Another reason is that the number of mortgage-seeking Chinese national buyers is still very limited.”
- Source: Mansion Global Photo: Isaac Lawrence