This is Part 2 of Owner Occupied Loans. In this writing I will feature several of the legal aspects of this all-important Program.
If you missed reading Part 1, click here!
This is Part 2 of Owner Occupied Loans. In this writing I will feature several of the legal aspects of this all-important Program.The purpose of this article is to encourage investors to continue to make these loans, in spite of the rumors that exist surrounding them.
I will start off this article the same as the beginning of Part 1, by saying that I will always offer loans to homeowners that are owner occupants. It is an important segment of lending and a heck of a niche for my office. I will say that the feds have brought about a lot of regulatory protections for this class of Borrower, but that is simply because they have determined home ownership to be such an important right and should be protected. It’s kind of like car seats for kids, seat belts, speed limits, food labels, movie ratings, warning labels on medications, etc., etc.
I will also tell you that there has not been a foreclosure of an owner occupied loan originated by my office (that I am aware of) in the last 6 years. This is key.
There are really just 2 quasi-objectionable regulations that apply to owner occupied transactions.
- The loans can be rescinded for up to several years if the correct disclosures were not made at the beginning of the loan. Rescinding a loan means that the Borrower gives back the principal and the investor (and the Broker) give back the interest and the fees. I asked our attorney about the incidence of this and he had no answer. I have never heard of it happening. I have also done tons of research on line on the subject and cannot find case law that applies. That is proof that, while there is lots of regulation, the occurrence of legal problems with these loans must be minimal as I cannot find anything on the subject.
- These loans take longer to foreclose upon. As these loans are required to be serviced, this is a servicing question. The regulation requires you wait 120 days to begin the foreclosure process. Then it’s just the regular foreclosure timing. From my experience, most investors would wait this long at least. Add to that the fact that we have not had a residential foreclosure (that I am aware of) in the last 6 years and it really is much ado about nothing.
So, statistically, owner occupied loans don’t get foreclosed upon in any significant number (zero in my office), Borrowers do not rescind the loans in any significant numbers (I cannot find any mention of it on line), the loan to values are good, they have an ability to repay the loan, they have an exit strategy, they pay the property taxes and insurance monthly, they do a consumer credit counseling class and the properties will likely appreciate in the coming months and years.
So if you hear mention of avoiding these loans, show whomever has said it these articles. These loans are important and a very good investment.
Hard Money and Private Money are interchangeable and have also come to be known as alternative financing or creative financing. Such loans are funded by individuals looking to fill a gap in the market place. They are private investors who want to help borrowers get that home or investment property they want, without having to wait for their credit to improve. Typically they need only see steady income and a good down payment to approve.
There are many benefits to owning a home. Increasing equity and the ability to make improvements or changes to the house are homeowner benefits I will discuss here.
Paint (parts of) the exterior
This will be the first in a series of articles that will explore the varied types of loans we offer Investors.
Most people don’t like trying and then failing. But what happens when you try “doing what everyone else is doing” and don’t get the results expected? You could throw up your white flag and be done with it, or, you can isolate what the problem was in the first place and try again. 
These days, Borrowers typically only need one or more flaws in their qualifications to be denied traditional lending. This can be a huge disappointment to Borrowers who otherwise have fantastic qualifications and are in great need of help.