A Newsletter for Investors in Trust Deeds
Integrity • Knowledge • Honesty April 2011
HARD MONEY INVESTOR SEMINAR
Attend this informal discussion of current regulations impacting Hard Money Investments. Tuesday – May 9th @ 5:30 pm at the offices of Sun Pacific Mortgage – 800 Mendocino Avenue #2, Santa Rosa. RSVP please to Loan Originator, Broker or Lynn.
SPECIAL GUEST SPEAKER: Santa Rosa Attorney Max Broome will be there to participate in the discussions and answer your questions from a legal perspective.
Message from the Broker…
So much change has been wrought in the lending industry since what has been deemed the “mortgage debacle”. With the dust somewhat settling on the new lending landscape I thought it time to inform Investors of just a few of the regulatory changes impacting Hard Money. These changes impact the Borrower, the Mortgage Broker and the Investor.
PREDATORY LENDING
I have to admit that I’ve been doing these Hard Money loans for years and I thought the Feds had labeled them Predatory Loans. In really digging in to the more recent laws that apply to these loans I made an interesting discovery for myself. These loans are not called Predatory Loans because they are high interest rate and high cost loans. Investors are not predatory lenders because they make private money loans. Predatory Lending is the practice of making a loan to someone that is not in their best interest. Or making a loan to them that does not have a tangible benefit. Or giving them a loan that is not the best loan available for their borrowing profile. Or bait and switch. Or no disclosures to them. Or an onerous prepayment penalty.
The Predatory Lending Laws have as their purpose the eradication of the patterns and practices of lenders that might be deemed predatory.
I personally think it was the federal and of course overblown response to the few bad eggs who were predators with their patterns and practices as mentioned above. Those guys are likely out of business but the remaining mortgage lenders (this means you) are left with the cumbersome compliances that were designed to keep those already chased out of business from harming borrowers further.
AFTER FURTHER REVIEW…
PREDATORY LENDING
The only area I can see for improvement in my own operation is the interest rate we charge borrowers. It is usually 12%, which is not at all
predatory. What may approach predatory per the intent of the feds is that we give that rate to everyone. The practice of giving a borrower who has 50% loan to value the same rate as someone who is at 75% loan to value is borderline in my new view of what the feds are looking for. That gap magnifies when you look at ability to repay, which the feds also now mandate the lender look at.
And I mentioned at my last Seminar the fact that the feds deem the person actually putting out the money as the lender. Not the Broker. So you as the lender should be looking at your patterns and practices.
SUMMARY…
From my review of the regulations currently plaguing us, there is nothing I have seen that should stop you from making Hard Money loans.
I would suggest that the next time you get approached about doing a loan with a better loan to value or strong borrower or nicer property, that you think about the rate you will require for that loan.
Your Broker should be compelled to do that on your behalf as a pattern and practice.
Feel free to call or email me anytime with further questions you may have regarding investing in Deeds of Trust.
Best,
Owner
Owner/Broker
Unique Identifier # 289456
Sun Pacific Mortgage & Real Estate (707) 523-2099
800 Mendocino Avenue #2, Santa Rosa, CA 95401
Visit us at: www.sunpacmortgage.com
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