With the Dodd-Frank bill having no chance for repeal, it appears their new proposed rule changes will be enforced. Most of these new rules affecting our industry revolve around Owner Occupied residential consumer loans. These changes will begin in January 2013. Some of the changes that will impact the “Hard money” space are listed below.
NO financing any lender or broker points within the loan! This means the borrower will have to pay the origination fees out of their savings or finance it on a credit card.
NO Prepay protection will be allowed to the lender! This will eliminate the ability to offer ZERO points for a residential loan, a feature that has allowed the majority/total of points to go to the broker.
No Balloon payments will be allowed! This will likely force lenders into 30 year fully amortized loans. With the current loan rates this is a good thing but in the future it may prohibit short term loans at reduced interest rates.
All borrowers that want to get Hard Money/Alternative loans on their home will be FORCED to attend Consumer counseling set up by HUD.
Considering selling your home using a Contract for Deed? There are considerable risks for the homeowner in choosing this option. We would encourage getting legal advice from a real estate attorney before implementing this option.
The end results of these pending changes will affect the cost of capital to the consumer.