Private Money Lenders Orlando
For a multitude of reasons, certain individuals and corporate owners will seek financing from private lenders in connection with acquisition of real property. Private Money Lenders Orlando fall into three broad categories, Individuals, seller financing transactions and hard money lenders. For the purpose of this article, we will examine hard money lenders and determine if they are required licensing in the state of Florida.
Hard Money Loans
Hard Money loans are typically made by individuals or small groups of people. These loans are made to borrowers who are unwilling or unable to borrow from traditional lenders due to time constraints or difficulties satisfying stricter institutional lender requirements. Hard Money loans are primarily asset driven and based on the equity the borrower has in the real property. The payment terms of hard money are typically interest only with a balloon after one year. The interest rate and fees are typically greater than those of individual loans because hard money loans involve greater risk.
Current Federal Regulatory Framework
In response to the global financial crisis of 2008, The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was passed. Fortunately, like its predecessors RESPA, TILA, and GLB, Dodd Frank does not apply to loans made primarily for business, commercial and loans made to entities, however, because Dodd-Frank broadly defines “loan originator” it applies to loan transactions that would have been exempted from coverage. The licensing requirements for loan originators, mortgage brokers, and mortgage lenders are fairly strict. The requirements include background checks, pre-licensing classes, audited financial statements, net worth requirements and more. Many private money lenders orlando have operated under the assumption they have had exemptions to these licensing requirements.
Recent OFR Decision
In a recent Declaratory Statement and Final Order the Florida Office of Financial Regulation (“OFR”) provided clarity to the approval of many hard money lenders by stating the proposed business activities of the loan did not meet the definition of a mortgage loan. Private Money Lenders Orlando would not need licensing.
in 2017 the Florida Legislature responded to the OFR’s Statement and passed HB 747, which broadened the definition of Mortgage Loan. As a result of the change in definition any loan secured by residential property is considered a Mortgage Loan, which subject the lender to the licensing requirements of Section 494 of Florida Statutes.
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