Posted by James Buster on July 15, 2002 at 20:36:21:
>In California Hard Money Lenders are already restructuring to finance NOO homes or small commercial properties
Does this evidence a shift to offering long-term NOO financing of the sort you can use to hold a property, rather than the very expensive short-term money typically offered by hard money lenders?
AB_489 - affect on HML in California? - Posted by Heidi W
Posted by Heidi W on July 10, 2002 at 24:47:38:
How does the passage of AB-489 (Predatory Lending Legislation - gone into affect in CA as of 7/1/02) affect Hard Money Lenders.
http://www.mbaa.org/state_update/2002/ca/ab_489_bill_chaptered.html
I’m looking to refer my foreclosure clients to a hard money lender - but with this law I’m curious if the money will still be out there. It appears the terms and conditions are much stricter and less profitable - especially for people in foreclosure.
Opinions? If I referred to someone not in compliance with the law - would I be liable (if I received a referral fee)
Thanks,
Heidi
Re: AB_489 - affect on HML in California? - Posted by Ed Garcia
Posted by Ed Garcia on July 10, 2002 at 10:32:45:
Heidi,
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
won’t.
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
bigger reward.
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.
Ed Garcia