Written By: Glenn Michaels, Op-Ed Writer
Hard money lenders for a long while I thought was a thing of the past. However I was wrong they do exist. Hard Money lenders that do exist are under strong scrutiny for harming the consumer. However there are times an applicant needs a Hard Money Mortgage.
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New York State regulators attempted to clean the Hard Money Mortgage Industry. New York State’s Predatory Lending Rules have forced many of the Hard Money lenders to go out of business or to change their lending procedures and methods not to mention the curtailment of higher than normal points and rates based a borrower’s credit situation. In addition the federal government issued rules and regulations restricting the Annual Percentage Rate (APR) that can be charged by a lender to a borrower over the comparable t – bill rate.
Today’s Hard Money lenders are requiring individual borrowers to form corporations or limited liability corporation to bypass some of the Predatory rules and regulations Properties owned by a corporate entity or are considered an investment property and the anti - predatory rules are not applicable.
Most Hard Money lenders consist of offering high mortgage interest rates, higher points and a short term loan often with a balloon payment at the end of the mortgage. Investment properties and corporate entities and investment properties are exempt from the predatory lending laws.
The New York State Department of Financial Services Superintendent is aware of these loans and the New York State wants to put an end to these loans.
New York State wants to end the short term high interest loan mortgages. If successful, these predatory mortgage loans will be out of the market.
The intent of New York State and other states is to put these lenders out of business as they are circumventing legitimate mortgage lenders from business and hurting borrowers by taking out predatory loans. In my opinion very often these borrowers are unable to obtain mortgage financing of any kind due to their credit, income or other circumstance and these hard money lenders serve those that cannot obtain traditional financing.
Recently an applicant of mine was denied traditional mortgage financing due to recent mortgage lateness. The borrower was severely ill and was out of work for several months. After the borrower was well again and back to work the borrower applied to several lenders to refinance their mortgage. They were denied everywhere they applied because of their circumstances. If they need the funds for whatever the reason they had to go to a hard money lender to obtain funds.
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If New York State and others eliminate Hard Money loans there will eliminate the opportunities for borrowers that really need the financing.
About The Author
Glenn Michaels - As an op-ed writer, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter (www.MortgageUnderwriter.org). As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years.
