The Real Estate Financing Rules Are About To Change Thanks To Dodd-Frank!

Posted in Real Estate by Jake on November 28, 2012 No Comments yet

With the Dodd Frank bill having no chance for repeal it looks like we will have to live with their new proposed rule changes.  Most of these new rules that will affect the lending community center around Owner Occupied residential consumer deals and will start in January 2013.  In essence,  the hard money lenders have one more month to close Owner Occupied hard money deals before this necessary piece of the lending world is turned upside down.  Some of the changes that will wildly affect the “Hard money” space are listed below.

 

-NO financing ANY lender or broker points within the loan!  Yes this means that the borrower will have to pay the points out of their savings or finance it on a credit card….no joke!

-NO Prepays protection will be allowed to the lender!  This will not allow Lenders to do loans for no points, further restricting the already limited points that you can charge all to go to the broker!

-No Balloon payments will be allowed! This will make the vast majority of lenders exit the O/O hard money space because they are use to short term commitments and forcing them into 30 year fully amortized loans is not the model that fits the niche.  All the hard money brokers that use private investor money will not be able to talk their investors in to a 30 year loan…for the same reason!

-All borrowers that do still want to get Hard Money/Alternative lending loans on their home will be FORCED to attend Consumer counseling set up by HUD.  This will just create  another entry barrier to obtaining financing on their home!

 

So… these changes that are right around the corner will wildly affect the cost of capital to the consumer in a negative way.  If you are a real estate or lending professional that has or had a borrower entertaining using Alternative lending to get them in to their home of their dreams or getting the capital they need,  you should submit your loan request immediately and plan on closing the loan in December!  If you are a home buyer trying to take advantage of the current housing either because of the loss of another home through short sale or foreclosure, or you just want to buy NOW and need hard money to do so, you need to act quickly!

 

Most lenders are committed to staying in the O/O alternative lending business after the Dodd Frank rules are implemented in January,  but closing an O/O loan this month will be easier and more profitable for you by far!  Get your O/O financing before the cost of capital goes through the roof!