Most of the lending community has the simple attitude that it doesn’t pay to take chances, and I wholeheartedly agree. If you’re not sure then disclose, disclose, disclose.
Most of the lending disclosure requirements go under the terms “Regulation B” and “Regulation Z.” These are federal regulations – state laws may vary.
When making a hard money loan on real estate, is it necessary to fill out a disclosure form? Are any other forms necessary? Are there any reasons to avoid making a hard money loan?
If it’s a one-time loan then there are exemptions for people who make, I think it’s less than 25 loans a year. But if you are planning on going into business making hard money loans and are trying to determine what’s involved then yes there are lots of disclosures involved.
A big one is the truth-in-lending requirements where you must spell out exactly what APR the person is getting, how many payments are required, how large those payments will be and how much money you are providing to them or on their behalf.
I believe that’s why most people prefer to buy mortgages instead – much less paperwork.
OK,there are some exemptions if I only make a few loans a year. If I make a loan secured by a deed of trust, am I exempt from the truth in lending laws – spelling out the APR, number of payments, etc? Am I exempt from some disclosures, but not from others? I recall that John mentioned on one of his tapes that failure to comply with disclosure can result in loss of principal – so I want to get this right.