Great News for Investors!
Financing Loans Archives
Plan is ‘final crisis-era’ modification program
A day that many in the housing industry thought would never come is finally and actually here, as the Federal Housing Finance Agency is making official what was first reported several weeks ago – widespread principal reduction is coming.
DODD FRANK FOR TODAY’s INVESTOR
by attorney Harry Borders
PART TWO- RESTRICTIONS ON OWNER FINANCING!!!
Here’s the GOOD NEWS… Investor buyers can STILL get financing from any source they want.
Here’s the TERRIBLE news… Owner occupant buyers now have lots of restrictions place on who they can get a loan from.
These new rules impact “contract for deeds” and “Land Contracts” as well as seller retained mortgages (and, of course, the ever present contract for deed in disguise as a lease-option) and private financing.
So, assuming an owner occupant wants to obtain a loan from a source other than a bank or mortgage company, here are the new rules.
If the lender only lends once in a 12 month period, the lender:
a) MUST be a “natural” person (i.e. not an LLC or corporation);
b) MUST have owned the property (i.e. no private financing, only owner financing);
c) MUST NOT have built the home in the ordinary course of his/her business;
d) MUST NOT have a negative amortization;
e) MUST be for at least 5 years, and if longer and adjustable, must be tied to an index rate, such as Libor
If the lender lends 2 to 3 times in a 12 month period, the lender MAY be an LLC or corporation. But the lender also:
a) MUST have owned the property (i.e. no private financing, only owner financing);
b) MUST NOT have built the home in the ordinary course of his/her business;
c) MUST NOT have a negative amortization;
d) MUST be FULLY AMORTIZED;
e) if the rate is adjustable, it must be fixed for at least 5 years, and it must be tied to an index rate, such as Libor; and
f) MUST determine in good faith that the consumer has a reasonable ability to repay the loan (similar to what a loan officer would do).
If the lender lends more than 3 times in a 12 month period,
all of the above requirements for a lender lending 2 to 3 times in a 12 month period apply and
IN ADDITION, the lender MUST BE A LICENSED LOAN OFFICER.
As you can see, navigating the waters of seller financing has again become tricky.
Please check with your real estate attorney before embarking on a seller financing transaction for a dwelling.
Until next time, peace,
P.S. Your simple solution to stay out of trouble is to never offer seller financing to any tenant / buyer or owner occupant. You can use Seller Financing to sell to other Investors, not owner occupants.
check out this very interesting article on
Foreclosure Fraud Settlement Insider Secrets
Here is the link
I suspect those of you who are in the market for a mortgage are well aware of the new FHA mortgage insurance increase coming. It’s only a quarter of a percent increase. ONLY?
Effective April 1, 2013, people who haven’t already gotten their FHA case numbers assigned will be subject to the new bigger and better mortgage insurance premium. The increase will be between 10 and 15 basis points, depending on the loan. This is all intended to make the FHA bigger and better – more secure.
This is a Silent Tax.
On the average, mortgage folks are looking at an increase of $30 to $40 per month. This will make qualification more difficult for everyone.
The FHA has a number of other changes coming to a loan office near you. They are all silent taxes on home owners. The corker is the inability to drop mortgage insurance after you have paid the balance down to 78%. In the good old days you could drop the mortgage insurance after you had paid down to the 78% of loan to value ratio. Starting in June 3, 2012, mortgage insurance will be locked in FOREVER on most loans.
Mortgage insurance adds, let’s say, $175 per month to the monthly payment. With the increase it will be over $200. If you assume you will pay down to 78% of the principal in the first ten years, then you have twenty years left on your mortgage. Whereas you could have dropped the mortgage insurance after the ten year period under the old policies, you now have to continue to pay it for the next twenty years. That’s only about $42,000 more you will have to pay. That’s a tax levied by the new Obama laws, plain and simple. You are paying for all the screw-ups the government and banks have made and continue to make with affordable housing.
If you are buying, do it now!
from GOLD Member Rod Owens