As most people in the mortgage lending industry well know, the Dodd-Frank and the Consumer Protection Act have made it even more difficult for consumers to obtain loans by trying to “protect” them. By placing new and expensive regulatory requirements on mortgage lenders, many mortgage companies have closed up shop.
The new Act has also placed new restrictions on non-bank lending that did not exist before the financial crisis. In order to protect themselves, the majority of hard money and private money lenders won’t even lend to consumers anymore, but only to business entities on investment properties. For example, a homeowner who needs to refinance and can’t qualify at the bank, is now unable to obtain a loan from a hard money lender.
The Consumer Financial Protection Bureau, created by Dodd Frank, is set to release a new set of mortgage lending standards by January. The Bureau’s Chief, Richard Cordray, says he is carefully weighing all factors that may undermine the housing recovery by making it more difficult for consumers to obtain credit. Mr. Cordray hit the nail on the head when he said, “It doesn’t do anybody any good for us to develop an elaborate set of protections if nobody’s going to then lend money to consumers.”
But I think this may be, “one day late and one dollar short,” as the old saying goes. These new regulations have already made it nearly impossible for a consumer, who is about to lose his or her home, to save the home by obtaining a non-bank, private or hard money loan. For example, a homeowner recently came to us for a loan on his primary residence. He had never missed one payment on the loan when the bank suddenly went under and was taken over by the FDIC. His note was sold to a 3rd party for pennies. Because of the new consumer protection act, he was not even able to get a private money lender to make a loan to him because the house was owner occupied. As a result of the bank going under, he lost the house even though he has never missed a payment in his life. When you hear a story like this, you may ask yourself, how are these new regulations really protecting consumers?
The purpose of Dodd Frank and the Consumer Protection Act is to put an end to the risky lending practices that fueled the financial meltdown. But wasn’t it the derivatives on Wall Street that actually fueled these risky lending practices? And wasn’t it the sub-prime loans coming from the “banks” and not “private money lenders” that are the risky loans the Bureau is referring to? What is your opinion on this topic? Please leave your comments below.
Corey Curwick Dutton, MBA. Real Estate Lender for Private Money Utah
Corey Ann Curwick is a private money consultant for Private Money Utah, a real estate lender based in Salt Lake City, Utah. Corey is from Austin, Texas and is an MBA Graduate of the prestigious Thunderbird School of International Management. An authority in the private money lending industry, Corey provides educational resources for investors who use hard money loans in their real estate investing activities. Before she joined Private Money Utah, Corey was the President of an investment education company in Utah called Bray-Conn Investments LLC. In this role, Corey organized classes, which taught investors how to invest in five asset classes. In her free time, Corey enjoys skiing, snowboarding, and mountain biking in the beautiful Utah outdoors.