Tenancy-in-Common Fractionalized Loans Weather the Mortgage Storm

San Francisco Chronicle (02/01/08); Lloyd, Carol
Since their creation in 2005, fractionalized Tenancy in Common (TIC) loans have boasted a nearly spotless record even in this era of defaults and foreclosures. Fractionalized TIC loans were created at the peak of the mortgage boom by California's Circle Bank and Bank of Marin to offer consumers the opportunity to buy into TIC homes without sharing a loan for the entire building; several other daring lenders followed their lead on what was considered a high-risk product. Despite the perception of risk, the loans have performed exceptionally well. Insiders say one reason is the fact that their innovative nature makes TIC loans virtually impossible to resell on the secondary market—meaning that the banks that write them must keep them on their books and face catastrophic losses in the event of widespread foreclosures. As such, lenders of fractionalized TIC products tend to require full documentation and employment verification and generally will bankroll no more than 75 percent of the property value.