Hard Money and Federal Guidelines on Sub Prime Mortgages by Leonard Rosen

The country's leading hard money expert, Leonard Rosen President of Pitbull Mortgage School shares his views on the new Federal guidelines for sub prime mortgages.

As many industry insiders already know, the sub prime and hard money mortgage industry is going through significant changes. A number of key Federal Agencies have adopted a new set of guidelines to insure and protect the consumer.Never has the sub prime industry and hard money mortgage market been impacted by the recent explosion of mortgage defaults and high foreclosure rates.

Many of the recommendations buy most accounts, are ambiguous and open to interpretation. However, the report does offer some needed guidance in a tumultuous market. Real estate values for most of the country have dropped significantly especially in areas of California, Nevada, Arizona and Florida. In addition, foreclosure rates are at a 20 year high.

The new Federal Guidelines states that a mortgage lender should evaluate the risk factors of a adjustable rate mortgage loan using a fully indexed rate rather than underwriting the loan based on the initial start rate. In my opinion, I think this is a good idea to adopt. The proposal goes on to address increasing the documentation of income requirements in determining the borrowers ability to repay.Obviously this proposal is geared to protect the consumer. The proposal does not affect all lenders nor does the issuing body specifically address hard money loans for consumers in default or foreclosure. I fully agree with the premise of making sure there is a loan suitability requirement. Having said that, the proposal does not address the issue of a sub prime borrower who needs a short term hard money mortgage to cure a a default.

I am all for protecting the consumer from fraud and deceptive practices, but when the bureaucrats begin to regulate and mandate lending practices, we should all take cover.