If a foreign investor borrows money from a foreign bank to purchase a rental property in US, can the investor still claim the interest deduction in his 1040NR schedule E? The property has rental income. There will be no year-end 1099 for sure.

Yes. Irrespective of the source of the mortgage, the mortgage interest on rental property IS fully deductible.

Thank you so much for fast response. I missed one part in my original question. The mortgage was taken before the property was purchased, so the property information is not on the mortgage. Since there will be no 1099 information to IRS and there is not direct link from the mortgage to the rental property, will IRS disallow the deduction? If IRS allows the deduction, does the investor need to withhold anything in the payments to the bank because this property located in US? Any particular IRS forms?

Just get a signed letter from the lender that the loan is secured by the property. That should satisfy the IRS if the issue arises.