Section 1431

LAWS TO PROTECT THE CONSUMER WILL RESULT IN THE EXIT OF ALL PRIVATE MONEY LENDERS FOR OWNER-OCCUPANTS.

Section 1431 of the Dodd-Frank Act enacts provisions that:
1.) require the consumer to go to counseling and receive a certificate. Borrowers have emergency situations that may require that the money be obtained very quickly. Private money is FAST. How long will it take to get an appointment and go to counseling? The worst part of this law is that many times, homeowners come to us at the last minute, because their conventional lender decided not to do the loan at the last minute. Our borrowers are putting in 40% of the cost of the house, and we explain our loans very carefully. Our borrower know how to manage their money and pay us back.
2) require that we not charge anything for a loan modificaton or extension. That is a wonderful concept, except that I don’t know anyone else who works for free, so why are we supposed to? Our investors are PRIVATE individuals: we have to speak with them, prepare paperwork, review all of the documentation, and get signatures in order to do note extensions.
3) prohibit balloon payments. Well there goes the private money loan out the door. Unless, you just want to borrower $5000 and pay it back over two years. Most of my customers buying houses are borrowing $30-$50,000 and they plan on refinancing at the end of their two years. We aren’t able to sell our loans on the secondary market, and the private investors that I use don’t want to lend out their money for 30-40 years. Instead, they will simply say “no thank you”, and the borrowers will have to do without private money. In most cases, that means they can’t get the house.

Listed below is a text excerpt about Subtitle C. Do your own research and if you think I am right, please write to michael.beresik@mail.house.gov and let him know that this will hurt homeowners by stopping the availability of private money funds from private investors.

2.3 High-Cost Mortgages

Subtitle C (High-Cost Mortgages) of the Act sets forth additional requirements for high-cost mortgages, including a prohibition on balloon payments, debt acceleration and modification or deferral fees, and restrictions on late charges. Many of the new high-cost mortgage TILA provisions will now be similar to respective State law provisions. Considering these restrictive amendments, creditors and the secondary market may act more cautiously in future when extending or purchasing high-cost mortgages. The Act also adds a new TILA provision prohibiting a creditor from extending credit to a consumer secured by a high-cost mortgage without first receiving certification from an independent counselor approved by the Department of Housing and Urban Development (“HUD”) or a State housing authority. Such certificate must confirm that the consumer has received pre-loan counseling on the advisability of the mortgage. The Act provides two limited rights to cure a creditor’s unintentional violation of the high-cost provisions