Private Money Lending Regs
Hello all...first time post ..if I'm in the wrong place let me know...Question...I have been approache d by a Pennsylvania Mtg broker to supply my private dollars for rehab lend on non owner occupied properties in Pennsylvania. Do I ,as the lender need to be liscensed? what other regs may apply if any? The PA banking commission site is of no help. Any thoughts...short of hiring an attorney to tell me what you folks may already know. Thanks a million....Ebdreamn
Ebdreamn - if I read you right you have a gold mine in your lap, as many of us struggle to FIND hard money to do these rehabs and resell, it comes to you!. Are you planning on buying fixer upper homes, rehab, then sell? If you borrow the Hard money then no license is required.
I would love to have this guy call me and offer this ype of deal, I would certainly make it worth his while. Good luck.
Gold 51...I am the one with the capital...I would act as a lender to person's seking to purchase, rehab, and then either flip, or refi..all non owner occupied to avoid RESPA....what does PA say about me as a private lender...liscense? Thanks Ebdreamn
It would be strongly advised to seek competent legal advise.
I had a whole thing typed in here but decided to delete it because a web board is not where you should be seeking this type of advise.
GOOD LUCK
I dunno Frogger;
I'm thinking about getting into this private money thing myself. My investor group is starved for hard or soft rehab money, they all have great FICO's and financial statements, some loan/mortgage regs don't affect private loans and I have great collateral. There are also a ton of investors looking for passive opportunities these days. I'm thinking maybe its time to dust off one of my limited partnerships.
C- :-o
Generally speaking commercial lending, as opposed to residential, home owner, lending, is NOT a licensed activity and is not really very regulated by any gov. agency. And there is no interest rate cap, no license required, no gov. agency looking over your shoulder to make sure your terms are "fair", etc.
The big risk in making any loan on a home is this scenario:
A builder or investor (self-proclaimed) approaches you for a purchase loan. He claims this is a commercial loan, and he is NOT wanting a personal, consumer, home loan for himself and is willing to state that fact in a signed, sworn and notarized document.
Then, later, when he gets in trouble and is not able to perform on your loan, he claims it was a personal home loan all along, and he proceeds to try to raise every possible defense to keep you from getting a judgment or foreclosing on the property...including saying that this was really a home loan to him, and you knew he was just wanting a loan for his own house, and you are not a licensed mtg broker, and your interest rate was too high, etc.
There are actually some reported court decisions where this did happen to the lender's sorrow.
So as you proceed to get all the facts, work with your lawyer to make sure you have lots of legal documentation saying it is a commercial loan, is not a personal, consumer or residentail loan, the borrower understands it's commercial only, etc...a good business lawyer will know the language to use to have the borrower sign to protect you.
Thank you all.....Finally got a call from the banking commission...they confirm your statements to the effect that commercial lending is unregulated.....no liscense...in PA anyway and no caps on interest ,origonation fees etc....the advice about confirming commercial versus residential stsus is well taken....we will be pushing forward....a quit claim signed in escrow with the attorney ,note ,mortgage...etc....any other docs you guys can think of? Thanks again will be posting in the future to let you know how it goes.....Ebdreamn
Just get the whole agreement in writing now as the thing that often kills such a golden relationship is misunderstandings or misinterpretations of "the agreement" which never really existed.
A few dollars spent now with your attorney could save you bigger dollars later.