I was just curiuous what people think about how much intrest u can charge for a 1 yr loan. Say you pay off someone in foreclosures mortgage , bring it current and give him a year to pay it back. How much interest would u say can be charged for that one year loan ?
A HML could be as much as 15%…So that might be a good starting point. However…if you spend 10-20k to bring the loan current…can they pay an extra 1-2k a month to you on top of their current mortgage payment? I wouldn’t count on it.
Watch yourself when dealing with FC bailouts, my friend… Unconscionable advantage has driven many investors out of biz. While you may be their saving grace right now, don’t count on the distressed owner to remember that down the road. Then you have to explain to the man in black robes why you’re acting as an uncharted lending institution within his state (IF indeed you are, but the burden of proof is on you) and exhibiting PREDATORY lending practices. Be careful…
When push comes to shove, the judge is going to see your question as, “When someone is down, how hard can I kick them before they scream”…
well what if u take title and stucture it as alease to buy back. Im guessing there are no “lending institution” problems there?
Guessing in this business will land you in prison, playing house with Bubba. What if? Many states are legislating against investors that use that exact method. Can you say unconscionable advantage? Usury? Equity Stripping?If you absolutely feel you must do a foreclosure bailout…,no, I ain’t even gonna say how I would do it because I simply won’t.
I’m way too good-looking to go to prison.
<<I’m way too good-looking to go to prison.>>
Oh, no you’re not…Bubba likes him some pretty boys…and, hopefully Bubba is not there because he killed the last REI that screwed him over. You might even get in a quick game of ‘slap and tickle’ before he finds out that you’re an REI!
Not this cowboy…Nope, ain’t gonna do anything to go to jail for, nope, just ain’t gonna do it…(George HW Bush as done by Dana Carvey SNL 1989)
ROTFLMAO still…Kinda punchy here since I haven’t been to bed yet…I’m wanting to seriously mess up bighat’s foreclosee and have some anger to work through still. Many thanks for the laugh, Keith.
david , thanks for replying. im still a bit confused as to what exactly is illegal about buying someone in foreclosures house and giving them the option to buy back within a year for 20 % more? what is illegal about that? im not lending them the money. Im buying their house and giving them the option to buy it back at a 20% premium.
can someone confirm if that is illegal ??
It’s not my intent to pick on you, CashManNJ, but the ideas you want to implement have been around for a while and (for the most part) already legislated or will be in the near future. The political climate is changing for investors and you need to exercise extreme caution. What you’re proposing (through several different threads we’ve talked about Unconscionable Advantage, Usury, Predatory Lending) may not be illegal in your state yet but I’m certain that I’ll end up reading about you while you’re enjoying playing hose (HOUSE, funny Freudian slip)with Bubba in Federal-pound-me-in-the-a**-Prison. Watch your step and make sure you’re completely on your game and bulletproof before trying this stuff. I’ve known long term investors to go after other investors just for muddying the water. Read the article.
thanks david, i didnt take it personally at all. i appreciate ur response. but u still havent explained why 20% is considered usury. ive seen people get charged 30% by their credit card company (citibank). if thats not usury why is buying someones house and giving them the option to rebuy at a 20% premium even unethical??? i still dont see anything wrong with it. and u dont seem to be addressing this issue ?
You asked for what people think…they have told you. Why argue with them…you’re gonna do what you want regardless of very good advice.
woaaaa, no need to get nasty . im just trying to get an understanding of why e thought like that?? what is ur opinion TN on this question?
My opinion is the 2nd post on this topic.
It’s for the benefit of our industry that we want to prevent you from stepping all over yourself. After reading the article, do you see what’s happening? I’d hate to see anyone in trouble.
the reason why it would be considered usury is because you are the last resort for that poor family to keep their house. So they will do anything you say to let them live in that pretty house. When a homeowner is desperate they will accept the worst terms. So the gov’t regulated the terms and interest that you can charge a distressed homeowner. Here in NC the max interest is 8% and a few fees that probably come to another 2-3%. That about all the equity you are gonna get. Anything more can cost some serious penalties. Also with the lease back deal is the same. If you buy a 100k at FMV for 70k its still usury, because if you have done a short sale then what ever discount you negotiated. The homeowner still has to pay that balance back. In this case 30k in deficiency judgements. On top of that you want to sell the home back to the owner or excuse me lease the home back for say 110k. Then this homeowner just paid 140k for this home. And who is the only one that benefited? And who is going to jail for the long haul. Also penalties and fees that will be added as a deficiency on your behalf. Now would you want that homeowner to pay that much for a home?
Also cash the other answer to your question. The only way credit cards are allowed to charge such high interest rates, because credit cards are an unsecured line of credit. And for loan just on your signature deserves a higher rate of return. The credit rates are not depending on saving the home.
Yeah and on this one, let me give a shout to Keith. Get at me dog.
Are there any laws like this in Texas? I’m a bit confused here. So - In other states, you can not buy for pay-off at the foreclosure sale?
“So - In other states, you can not buy for pay-off at the foreclosure sale?”
Sure you can, bighat. What’s being discussed is what amounts to a thinly disguised foreclosure bail-out loan. $Cash$ posted a link to an excellent article put out by www.consumerlaw.org that I highly recommend reading. Investor profit in these scenarios is being closely scrutinized by several states as either predatory lending or equity stripping. Buying at the courthouse steps is still OK…(until the AG changes that too!! ;))
I’d google Texas Department of Banking for info on Usury laws in TX.
I was thinking - oh no - I, along with all the most other investors in Texas, might be talking to Bubba as well.
Dave you also mentioned learning contract law. I’d like to learn some contract law, I might already know a little - just not sure what exact laws I need to know as an investor.