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Hard Money Loans and Required Disclosures For a High Cost Loan

It’s Day 3, the last day at the course, studying for my Florida Mortgage Brokers License.  This is our final day at Gold Coast Schools.

Our instructor for Day 3 is Mr. Bill Bates. True to his professionalism, Mr. Bates slugs through the pages of the Course Book with us.

One of the more interesting subjects we work on today is guidelines for lenders (normally private investors) who do “high cost loans”.

When borrowers are talking about “high cost loans” they are referring to loans outside normal bank underwriting parameters.

The State of Florida’s Office of Financial Regulation has laws which govern certain procedures for “high cost loans”.

High cost loans, sometimes referred to as “Hard Money Loans” are not usually made by institutional investors (banks). Normally, there are too many additional risks which institutions walk away from leaving only the “hard money” private lenders toaccommodate.

In these cases the following rules apply under the Mortgage Brokerage and Mortgage Lending Act, Chapter 494 Florida Statutes.

Required Disclosures For High Cost Loans

In addition to other disclosures, notice to the borrower (that):

a.  the lender will have a mortgage on your home and you could lose your home.
b.  rates vary, shop around and compare loan rates and fees.
c.  you should consider consulting a qualified independent credit counselor (a list of local credit counselors
      is available from HUD)
d.  you are not required to complete this agreement because of receipt of these disclosures or a signed loan
      application
e.  borrowing for debt consolidation in the presence of continuing significant new credit card charges can cause
      a loss of your home and any equity in it
f.  property taxes and home owners insurance are your responsibility as only some lenders provide escrow
      services
g.  you should not accept advice causing you to ignore regular payments to your existing creditors.
h.  with regard to a fixed rate mortgage, the annual percentage rate and the amount of the regular monthly payment
i.  with other than a fixed rate mortgage, the APR, regular payment amount, any permitted balloon payment, a
      statement that the interest rate and monthly payment may increase based on the maximum interest rate allowed
      pursuant to law

Enforcement

Any person or the agent, officer, or other representative of any person committing a material violation of this act shall forfeit the entire interest charged in the high-cost loan, or contracted to be charged or received and only the principal sum of said loan can be enforced in any court in this state, either at law or in equity.

What this means: if the lender does not disclose the annual percentage rate, the amount of the monthly payment or if he intentionally or unintentionally forgets to print a document which defines the loans payment requirements…THEN THE BORROWER GETS A LOAN…that’s ....INTEREST FREE!!

Day 3 of the course was short. We are finished by 3pm with book and diplomas in hand.

What’s next is more study and to go on the Internet and pay the State of Florida their required fee ($223) to take the Mortgage Brokers Examination.

For my fellow students, here is a link with instructions about how to apply for your Mortgage License online - http://www.flofr.com/licensing/MB-Individuals.htm

Although Gold Coast’s Mortgage Course was time consuming (22 hours), I have a lesson book and plenty of good notes which (if studied) will get me the Florida Mortgage Brokers License.

Overall, Gold Coast Schools was a pretty good organization. I made some new friends. It all went by very quick.

Related:
Day 1 - Gold Coast Schools, Studying for the Florida Mortgage Test
Day 2 - Prohibited Acts on Florida Mortgages

By Jim Jump To Comments
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