Re: AB_489 - affect on HML in California? - Posted by Ed Garcia
Posted by Ed Garcia on July 10, 2002 at 10:32:45:
In California, right now the big thing is Predatory lending. The whole idea of predatory lending is to not let borrowers with bad credit,
become prey to lenders who take advantage of them by charging high points and interest rates, therefore jeopardizing their house.
I personally feel that this is counterproductive. Hard Money Lenders and Sub-prime lenders, lend money to borrowers who can’t qualify
or fit into conforming lending. Usually the reason is BAD CREDIT. So they are taking chances with borrowers that conforming lenders
That being the case, if these borrowers can’t obtain funding to refinance their house, they’re going to lose their house for sure.
Hard Money Financing is like any other business; it’s based on Risk/Reward. These lenders take a bigger risk, and therefore they want a
These loans are based on equity allowing the borrower to buy time to either pay and save the equity in their home, or to give them more
time to market their property and get a fair price.
I can’t tell you through the years, how many Hard Money Loans I’ve made knowing that I’ve save the borrowers house. They were going
to lose it to foreclosure and there was no one there to bail them out. Now those borrowers have no place to turn to for funding and are
either going to lose their house by foreclosure, or be forced to sell their house.
If they are put into a forced sale, they have no time to test the market and get a fair price.
For me this is sad. On the other hand it’s good for investors. Hard Money Lending will now switch gears and concentrate on financing for
investors. Predatory lending does not effect none owner occupied homes. In California Hard Money Lenders are already restructuring to
finance NOO homes or small commercial properties. This is a much needed type of financing that got lost when the T&L’s (Thrift and
Loans) lost their thrift insurance and had to conform to financing regulations of the FDIC. The result was the stronger T&L’s became
banks, the smaller ones went out of business.