With the recent upsurge in residential foreclosures nationally, homeowners are finding themselves in a very unusual predicament. Over the last 7, borrowers with less than perfect credit fell into a category called :sub prime borrowers”. This class of borrower was able to obtain a mortgage with little or no documentation.
The lenders were all too anxious to lend money to this class of borrower. Consequently, many borrowers took advantage of possibly a once in a life time opportunity to own a piece of the American dream.
Then reality set in. Many borrowers purchased a mortgage with a negative amortization option along with interest only options. Rather than pay the fully amortized 30 year rate, they only paid the interest and in many cases paid the negative amortization rate.
The problem with this scenario is that mother time has caught up and the once easy affordable payment has re-set and the borrower no longer could afford to keep the property and make timely payments when the adjustable rate changed.
The question is, who is at fault? Many politicians and consumer agencies believe the mortgage companies are at fault for funding to this class of borrower. The mortgage companies qualified the borrowers on the teaser rate of 1%, not on the fully amortized 30 year rate. This turned out to be a perfect recipe for disaster.
We now have thousands of borrowers across the country facing foreclosure. So whats the solution?
A borrower may be able to obtain a hard money loan based on the equity and value of the property. This is called a hard money mortgage or private mortgage. The interest rate is considerably higher than a sub prime loan but the borrower is able to keep their property and develop a game plan rather than lose their home to foreclosure.
Many call hard money lenders “satin” for taking advantage of a homeowner in desperation. I suggest that the hard money lenders who offer this type of hard money mortgage are “angels”.
Without a safety net, many borrowers would surely lose their house. Hard money mortgages, when properly used, can be a very useful tool and a life saver.
I prefer to call hard money lenders “Angels”.
About The Author
President of Pitbull Mortgage School, the largest organization in the country teaching hard money to mortgage brokers and hard money lenders, Leonard Rosen was previously the CEO of a large medical group with 6 clinics. Also the former anchor of Financial News Network and host of the Leonard Rosen Show.
A Lifetime member of Who’s Who in Business, and author of “From here to Financial Freedom,” Mr. Rosen is a renowned National Speaker who has been featured in CNN, Forbes, American Chronicle and many local and National publications. Currently Mr. Rosen is a private consultant to numerous mortgage companies. A former Army Ranger, and a graduate of both the University of Minnesota and Shattuck Military Academy.