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Financing for Foreign Buyers

SELLING to foreign buyers was not the original idea behind the marketing of 77 Hudson, a glass-walled condominium tower a block from the waterfront here, just north of the Statue of Liberty. It may come close to describing the approach now, though, as the developer unfurls a new mortgage program for citizens of foreign countries interested in picking up a second home or two.

The concept, said Randy J. Brosseau, the president for metropolitan New York of K. Hovnanian Homes, the developer of 77 Hudson, was to attract young professionals from Wall Street to a Manhattan-style building here in “Wall Street West.”

The condo, which was named for its address on Hudson Street, is a short walk from both the Paulus Hook ferry and the Exchange Place PATH stations, which each offer commutes of under 20 minutes to Manhattan. Many of its 420 units have views of downtown and Wall Street. (The Statue of Liberty is much closer, though, and visible from even more apartments.)

In 2008, as the tower was rising, Wall Street started to “collapse,” as Mr. Brosseau put it. Starting with the Lehman Brothers bankruptcy the fall of that year, the condo market in Hudson County slackened and then went listless: a number of builders in Hoboken and Jersey City held auction sales of brand-new units; in mid-2009, the Trump Plaza tower was seized by the lender, before it was half sold; and sales at 77 Hudson, which opened late that year, never gained any real momentum.

Today the building is about half sold, according to Scott Waldman of Landarama, the broker for the project. Half the buyers are from foreign countries, predominantly Asian nations, but also Russia, South Africa, Turkey and the United Arab Emirates, he said.

“We do have some Manhattan professionals among our buyers,” Mr. Brosseau said. “The surprise was that our primary buyer turned out to be foreign nationals.”

Nancy De Nicola, a senior mortgage consultant at the NJ Lenders Corporation, the mortgage specialist for 77 Hudson, said international buyers had several reasons for purchasing there.

“Most already own more than one home elsewhere in the world, and are purchasing what are termed ‘holiday homes,’ ” she said. “Some literally use them to visit on vacations. We have someone who owns a business in Hong Kong and purchased a large unit so he can offer visits to clients as a bonus. A gentleman from Korea just bought a studio for his nephew. We have a buyer from India whose daughter went to school in New York, graduated, and her father purchased a home for her here.”

In May, the National Association of Realtors reported a $16 billion surge in international purchases in the United States for the year ending in March. The currency exchange rate has been strong for foreign buyers; the euro is currently worth $1.44 against the dollar, Ms. De Nicola pointed out.

At 77 Hudson this spring, the sales pace escalated, with 10 to 12 units sold over several consecutive months, most of them to foreign buyers, Mr. Waldman said. They all paid cash, “since that was pretty much their only option,” he said, given various lending restrictions on buyers who have no American income.

But Mr. Brosseau said, “We need to offer them another option.” He told Ms. De Nicola to scour the lending landscape, and find one for foreign buyers. She came up with an international bank — which she would not identify — that has offered a mortgage plan for foreign buyers in California. The bank was willing to offer mortgages at 77 Hudson on these terms:

¶Up-to-30-year loans, for up to 60 percent of purchase price (and up to five times a borrower’s annual income.)

¶An interest rate that can change on a quarterly basis (Ms. De Nicola said that is “traditional” in other countries), and is based on loan-to-value ratio.

¶Legal fees (estimated at $2,500 to $3,000), a commitment fee of 1 percent, appraisal costs, and a 1 percent broker’s fee, all paid by the borrower. The buyer must pay to have financial documents translated if necessary.

“With a mortgage program, I think they will get lots of people from Asian countries — especially Korean — and European buyers,” said Won Hee Kang , who is Korean and owns a three-bedroom on the 45th floor with his wife , Hee Jin Kim. “The timing is good now, because the dollar is weak.”

Ms. DeNicola, the loan officer, said that the program would make it possible for a buyer interested in an investment property to buy two apartments instead of one for the same outlay. “We have investors who want to do this — obtain a mortgage so they can buy an apartment to rent out.”

About a fifth of the units at 77 Hudson are now subletted, Mr. Brosseau said, and buyers often have them rented before they even close on the sale.

“I have to say,” said Nelson Chen, the president of the Chen Agency in Fort Lee, which caters to Asian buyers, “a mortgage program right now sounds like a very smart idea.”

Mr. Chen said he believes that “95 to 100 percent” of foreign buyers of high-end condos in the New York area buy them for cash.

Until recently, he said, certain banks would lend to up to 50 percent to individuals with whom they had established ties, granting a sort of “financial green card” for a residential purchases. But that dropped off with new lending requirements imposed after the federal bailout of the banking industry, he said.

Mr. Chen’s mother, Lorna Chen, who is a founder of the Chen Agency, said she bought a condo for herself at Crystal Point, a Jersey City high-rise building that opened after 77 Hudson, and sold 10 others to Chinese buyers — “cash payers,” she said.

The builder and broker at 77 Hudson say foreign buyers respond to their building’s sleek design, and its amenities, including an outdoor deck with a pool that has a view of the Empire State Building (and is shared by an adjacent rental building at 70 Greene Street).

“We find our international buyers don’t draw such a strong distinction about actually living in New York as people native to the area do,” Mr. Waldman said. “They pretty much say this is a ‘New York’ building, but the prices are better.”