All Forum Posts by: Brit F.

@Jay Hinrichs

Thank you, Jay. They are absolutely targeting owner-occupied properties.

I ran across a company and business model that seems suspicious to me, and I'd like some feedback from the BP community.  I'll not mention the company name yet.  It's less than one year old, and I found only one mention in BP on it.

Here are the particulars:

• Company extends consumer credit for a construction loan, secured by a Deed of Trust on the subject property, in order to repair/upgrade a primary residence prior to sale.  No payments are due until the home sells.
• After the company completes renovations, the property must be listed for sale within 5 days (hmm...that's odd)
• Every 30-days where the house doesn't sell, the sales price must be reduced by 2%.  (umm....what??!)
• Company doesn't appear to carry a valid NMLS license.  Nowhere in their entire website domain is the term 'NMLS' found.  NMLS has no record of this company's name.  I verified that a recent Deed of Trust filed in Dallas county lists the company's name as the lender, not a different 3rd party lender/partner or variation on their name which might show up in NMLS.
• One individual I found in their employee database (their Finance Controller) carries an inactive NMLS license.
• Company representatives stated that their loan cannot be paid back with cash or a refi; only selling the home will clear the debt.
• I've not been able to view their promissory note template yet, but I'm working on getting a copy.

My conclusions:

• This company appears to be in the business of regularly extending consumer mortgages, and thus is subject to the SAFE Act.  Plus, having at least one employee with an NMLS [inactive] license suggests they are knowingly violating the SAFE Act; I can't fathom how they could claim ignorance on this.
• Two elements of their business model seem highly predatory:
  • Forcing a consumer to sell their primary residence to clear the debt
  • Forcing a 2% reduction in equity every 30 days

I'm waiting on the Company to tell me what exempts them from either the SAFE Act or Dodd-Frank.  I'll be a shocked if there is a loophole that makes them compliant with state & federal law.

Thoughts?

@Craig Clark

If you are a cash buyer, then you can absolutely do an immediate cash out refi without waiting - even into a conforming loan.

Most typical lenders should be able to handle this, presuming the loan meets Fannie Mae's 'delayed financing exception' requirements. Look them up; Fannie's guidelines are publicly available.

I've used this method in TX several times.

@Vitamin Gee, couple of comments:

• I'd be surprised if this letter is from an attorney that knows US mortgage law because while the spirit of the letter is correct, the words are wrong.
• Prepayment penalties are allowed under certain conditions, but the loan you describe don't appear to meet those conditions.  Look up Dodd-Frank or search for rules on allowed prepayment penalties; the answers are out there.
• Regarding registration/licensing, CFPB only sets the rules; they do not approve or maintain anyone's license or registration.  NMLS and State-level agencies handle registration and licensing.
• Points of clarification based on the statement, "To protect my potential gains...": 
  • A balloon payment accelerates return of your investment (i.e. your original capital).  
  • A prepayment penalty accelerates profit, which is danger territory with respect to Dodd-Frank.
  • Only mortgage insurance can 'protect' your investment.

If you plan to extend this type of financing on a regular basis, you should consider getting a license as a loan originator or hire a loan originator.

You actually lucked out that this person caught the potentially illegal terms of the loan.  It could have been painful for you had this person not said anything and taken you to court later.

@Jim Morris, as to the deposit: write the check to the name(s) on the lease.

Also, I know you didn't ask for input on the eviction, but what's the justification for issuing it?  Are they behind on rent, or is it for illegal activity related to this incident?  Asking because if she OD'd on prescription medication, then it may not be considered illegal.  On the other hand, if the eviction notice was triggered by illegal activity, is it supported by public record or other report you have a legal right to view?  You really don't want to be challenged on this.  If she wasn't or won't be arrested, you may not have much ground for the notice to vacate based on this specific incident.  Consult with your attorney if you didn't already.

@Rudy Herrera, yes on comps and walking finished homes.  Other tools/techniques to help with visualization:

•  floorplan diagram
• a bound notebook or tablet for sketching ideas
• Pinterest, IG, and similar
• Social sites and forums - specifically where you show different pictures/sketches and ask for feedback
• Find someone who is good at visualization and take them with you to visit a property
• Practice visualizing homes you're not interested in.
• For color palette decisions, it depends on what you're going for...but, any home design site/magazines can show you what's popular...or <sigh> just watch HGTV
• Make friends with a local realtor in an area you're buying into and ask them what buyers & tenants want and don't want.

That should be enough to get you going.

@Watson Hilaire, yes, you can do a HELOC on investment property in TX. It may need to be a commercial product, typically for currently unencumbered property, and there are probably not many lenders that offer it. You just have call around to local banks and credit unions.

PenFed can allegedly do it in TX (based on one phone call I made a few weeks ago), but there are restrictions: The LOC applicant(s) can own no more than 4 properties, including primary residence.

@Account Closed, no question - have a licensed electrician replace the knob & tube wiring & panel.  

On your plumbing, if it has galvanized pipe, you'll likely need to re-pipe the house.  The water pressure is low likely because of all the rust on the inside of the pipes.  You wouldn't know until you look inside one of the pipes (or one rusts through and leaks).  If you don't want to re-pipe, I would consider this a short-term investment where you get it fixed up and then sell it quickly.  That re-pipe is coming (if galvanized); it's just a question of when.

If you're still in your option period, can you drop your price by $15k?

This isn't a nightmare scenario - it's an opportunity to add value.  

I always get a kick out these 'what would you do' threads...so, let's have some fun:

-I'd be wondering where my job and the rest of my money went.

-Go to Vegas and double it!  Then take that and put in the stock market and short <x> = double it again!

-Cut the chain off the briefcase and call the FBI b/c I must have been kidnapped and drugged.

-Buy 10 Corollas and put them on Turo

-Give $1 to 200,000 people

-Hire dueling piano's to play in my house whenever I want until the money runs out.

-Build a GoT set at a public park

That's enough for now...

In all seriousness, @Maria Luna, if you put some more structure & details around your situation and question, I'm sure you'll get more thoughtful and useful responses.  We can't really help you as-is.

@Shiloh Lundahl,

Yes, public school districts matter to both OO and NOO. Even specific schools within the same school district matter. Take a look at rental & sales comps near district boundaries and school boundaries. There can be substantial differences.

In my area, creating a metroplex-wide fluid school system, enough for public districts to not matter, would take substantial taxation/legislation changes....which isn't likely.