SF bankers now exporting tenant-displacing TIC loans

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Banker and mayoral appointee Stephen Adams is now exporting fractional TIC home loans to communities outside San Francisco.
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Fractional mortgage loans used to convert apartments into owner-occupied tenancies-in-common have fed the eviction and displacement crisis in San Francisco, where the median home price just surpassed $1 million for the first time. Now, some of the same San Francisco banks that pioneered fractional loans here have started offered them in the East Bay and on the Peninsula.

TIC housing is an ownership model for multi-unit buildings, where each unit is independently owned. This option appeals to would-be homeowners because it’s cheaper than a condominium, but less fraught than a traditional loan shared by various owners in a TIC building, which does not allow for independent ownership of each unit.

TICs local have grown in popularity in San Francisco as housing prices continue to skyrocket, since they help homeowners find something affordable, although that benefit usually comes at the cost of evicting all the tenants in the building, often including seniors, those with disabilities, and low-income people in rent-controlled units.

Previously, fractional TIC loans were only accessible in SF. Now, as people seek affordable housing outside of expensive San Francisco, the demand for fractional TIC loans has grown. And San Francisco bankers have stepped up to meet that demand, according to a recent article in the San Francisco Business Times (“High-priced SF housing market exports fractional tenants-in-common loans,” June 28).

Sterling Bank & Trust has become well-known for providing fractional TIC loans (more than $480 million worth so far, according to the Business Times), and is the first company to offer the loans outside of San Francisco. “We’re helping the firefighter and school teacher, or what I like to call the ‘non-tech’ buyer, purchase a home,” Stephen Adams, senior vice president of Sterling Bank & Trust, told the Business Times.

Adams is also president of the San Francisco Small Business Commission, presiding over what critics say is a shift in that commission toward rubber-stamping initiatives from the Mayor’s Office rather than defending small business interests. When we contacted Adams to ask about the evictions and displacement caused by fractional loans, he told he had “no comment to make at this time.”

Tommi Avicolli Mecca, the director of counseling programs at the Housing Rights Committee of San Francisco, said that he doesn't know how the TIC loans might affect those in the East Bay. But he does know they're bad news for San Francisco, where there's now a 10-year moratorium on new condo conversions but few controls on the creation of new TICs.

“They're scary,” Avicolli Mecca told us. "It's a disaster for San Francisco. Basically, if you're buying a tenancy in common, you don't need to condo convert. It used to be that you wanted a condo conversion so you could have a separate mortgage on what you own. With a fractional loan, you have your own mortgage from the start."

He added that the loans make it easier for sellers to convert buildings into any size that they can market to home buyers. With the loans, combined with the state Ellis Act allowing owners to remove apartments from the rental market, evicting tenants becomes even more profitable.

The Bank of San Francisco confirmed that it also offers TIC loans in the East Bay. The bank will be making them more attractive with interest-only payments, fractional financing for buildings with more than 12 units, and loans up to $2 million.

Dylan Desai, a spokesman for the Bank of San Francisco, told us that the bankers “do not extend financing to buildings where there has been an eviction” and, to their knowledge, they never have. “We’re sensitive to tenant rights.”

Hopefully the other banks offering these loans will be just as sensitive as they branch out into communities in the region that have already been absorbing an influx of working class former San Franciscans.

Comments

Fantastic news for people hoping to own a home in those markets that misguided activists have tried to destroy.

Posted by Guest on Jul. 17, 2014 @ 6:41 pm

I know of two married couples who split a place on this fashion, so as to find a way into homeownership that was within their means. They did not evict someone to get their place. They would have had no way to get there otherwise. And they couldn't have done it without these loans.

And now Steven has a problem with this. Of course. Why am I not surprised?

Posted by Guest on Jul. 17, 2014 @ 7:17 pm

The Guardian ignored the years-long LGBT controversies over the control of the rainbow flag at Harvey Milk Plaza, which used to be public property, when Mr. Adams was head of the Merchants of Upper Market Castro and his small business mafia told the public to drop dead.

Mr. Adams and MUMC would let the LGBT community have control of public property on the 12th of Never, but you censored this news from your paper.

In short, the Guardian has done a lousy job of keeping tabs of Mr. Adams as he has gained ever more power at City Hall and now you're making a fuss over his expanding anti-poor agenda, pro-displacement agenda.

Better late than never.

Posted by Guest on Jul. 17, 2014 @ 9:04 pm

can be evicted without cause and with 60 days notice. So the issue is moot outside of Berkeley and Oakland.

And no other city bans or restricts condos so, again, this article totally misses the point.

Fractional loans simply allow people to band together to buy a building without being dependant on each others' financial viability, although they still are to some extent for the property tax and other shared costs.

These loans do not lead to evictions. There is no proof of that. Owners evict if the tenants are not viable.

Posted by Guest on Jul. 17, 2014 @ 10:57 pm

These loans are good news for this finding the east bay difficult.

TIC are the way to go in SF for first time homeowners if they can't afford a million dollar condo. Which many of us cannot.

Tommi - get a life and stop preventing folks from trying to create some security of home ownership on their own. The reason that these loans exist is because of rent control. Reform rent control - and this City would be given back to families, not those needing to be subsidized by a private citizen.

TOMMI IS AFRIAD that more TIC owners will change the political balance and kick him out of town. Good riddance I say.

Posted by SF Resident on Jul. 18, 2014 @ 6:34 am

These loans are good news for those finding the east bay difficult, but it is still a risky proposition.

TIC are the way to go in SF for first time homeowners if they can't afford a million dollar condo. Which most of us cannot.

Tommi - get a life and stop preventing folks from trying to create some security of home ownership on their own. The reason that these loans exist is because of rent control has stifled small property owners. Reform rent control - and this City would be given back to families, not those needing to be subsidized by a private citizen.

TOMMI IS AFRIAD that more TIC owners will change the political balance and kick him out of town. That couldn't come soon enough.

Posted by SF Resident on Jul. 18, 2014 @ 6:36 am

My wife and I are part of a TIC, a three-story building bought with two other families in 1997. We are almost finished paying off the loan!

The fractured loans should be welcomed. Because they will only be used by people like me, who now have to share a loan with others (friends, in our case). Big property speculators do not need this type of loan.

I do not understand why you are against this practice.

It only benefits the people who are using TICs for the original purpose- to share a property among people you know, and lower housing costs. The sharks don't need it.

P.S. Tommi is a one-trick pony.

Posted by Barton on Jul. 18, 2014 @ 7:46 am

We did not evict anyone from our TIC.

We purposely did not buy a building where seniors lived. We politely asked the tenants to leave within a year and paid their moving expenses. They fully understood that we are family people and gracefully exited.

Posted by Barton on Jul. 18, 2014 @ 7:49 am

situation by buying a home. It really grates with them because it highlights their inadequacies and lack of ambition and success

Posted by Guest on Jul. 18, 2014 @ 8:21 am

"TICs local have grown in popularity in San Francisco as housing prices continue to skyrocket, since they help homeowners find something affordable, although that benefit usually comes at the cost of evicting all the tenants in the building, often including seniors, those with disabilities, and low-income people in rent-controlled units."

That's not true. Like, *at all*. You routinely do this.. you make some claim, try to slide it in as if it's just common knowledge, and go on with your bullshit. People who are converting to units to TICS are well aware of the penalties, risks, fines and general public blowback from evicting a senior or disabled tenant. You are easily looking at legal fines of well over $150K if you want to go that route. So if you're going to claim that that's the typical scenario in a TIC conversion then you need to cite it.

You can't, because that's absolute bullshit.

Posted by Guest on Jul. 18, 2014 @ 11:07 am

According to the data compiled by the Anti-Eviction Mapping Project, 72 percent of no-fault evictions in recent years have been of seniors and those with disabilities. With the 10-year condo conversion moratorium and these fractional loans, some home buyers apparently don't mind remaining a TIC indefinitely.  

Posted by steven on Jul. 18, 2014 @ 11:34 am

because before that, owners would wait for tenants to leave and then TIC, knowing that they could convert to condo.

But now that ability has been closed down, owners might as well Ellis now and settle for TICs.

Progressives really shot themselves in the foot on this one. A major reason for the increase in Ellis evictions is because owners are now reconciled to TICs. And those who buy them are too.

And TICs are not a subdivision or change of use, so there is nothing that the city can do about them. TIC ownership is governed by State law.

Posted by Guest on Jul. 18, 2014 @ 11:43 am

Too true. You would think that those who supported that foolish law would be more self-reflective. Unfortunately, they are the same ones trying to further distort the housing market.

Posted by Guest on Jul. 18, 2014 @ 12:54 pm

Owners and buyers have indeed reconciled with TICs, thereby expanding the market for fractional loans - increasing options, availability, and lowering costs. Thus TICs are more viable and valuable, especially compared to a poorly performing rental business model.

Posted by Guest on Jul. 19, 2014 @ 9:50 am

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