Friday, January 10, 2020

The Pitfalls of the Past: Dodd-Frank and Arizona Hard Money Loans

How has the Dodd-Frank Act influenced Arizona Hard Money Loans during and after the Great Recession?

It’s the mid-2000s. The housing market is on the rise as the price of homes increases. Due to this favorable uptick, more people are looking to acquire loans to buy houses. Lucky for them, there are less banking restrictions, and many people with subprime credit are getting funded. It seems great. The housing market continues to boom. Prices continue to rise. The economy’s strong. All of a sudden, Freddie Mac won’t accept dicey, subprime mortgages. This decision leads to peril for some major lending institutions who find themselves unable to get returns on their investments. Bankruptcy soon follows. As banks struggle and closely watch subprime borrowers, indirectly, the value of homes begins to fall. More banks go under, the housing market collapses, and the stock market takes a nose dive. Cue the Great Recession. So, in attempt to learn from history, or avoid the fate of repeating history, what does the government legislate? Answer: the Dodd-Frank Act.

Dodd-Frank changes the lending game, especially regarding Arizona Hard Money Loans. A portion of the Dodd-Frank Act lays out the Mortgage Reform and Anti-Predatory Lending Act. This act restricts the circumstances in which Arizona Hard Money Lenders may lend money to individuals desiring to purchase personal residential property. Other restrictions for residential loans are added as well. Those giving out Arizona Hard Money Loans must verify if the borrower is able to repay their loan.

As a result of this, Arizona Hard Money Lenders shift to focus on investors looking to rent, sell, or commercialize real estate. Mainly because the Dodd-Frank Act does not limit businesses in regard to hard money, instead, it is interested in protecting the US economy from experiencing another subprime and residential lending apocalypse.

Post Dodd-Frank: Arizona Hard Money Loans

While this creates challenges for individuals looking to receive help after struggling with bankruptcy, subprime scores, or foreclosure, it has become a boon for real estate developers, especially where conventional lending was scares in the past.

Who are some of the main recipients of Arizona Hard Money Loans today?

So, post-Dodd-Frank, if residential lending is limited, who uses Arizona Hard Money Loans today? Well, to start, flippers use Arizona Hard Money Lenders to finance renovations on outdated homes. Many flippers use hard money to cover acquisition costs of property. Other flippers purchase property with their own money and use Arizona Hard Money Loans to cover the cost of renovation, or a particular portion of renovation such as roofing, cement, or plumbing. After completing the flip, the property goes to market, hopefully bringing in a good return.

The next category of individuals is those who are looking to renovate to rent property. These individuals, like flippers, use Arizona Hard Money Loans to acquire properties or finance costly portions of the renovation process. Once the property is completed, it is marketed to the public in order to rent. After this category of borrowers, there are contractors who look to build and sell property and businesses that look to expand their property or projects.

                           
                                                      

                                                                                                                                         Dennis Dahlber Broker Ri CEO Level 4 Funding LLC

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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