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1. Tim - March 30, 2007

Rhonda-

Couple questions.

1) Just did a transaction with sub 600 FICO’s, NOO, 2nd home property (vacation) with a 6 % 30 yr fixed. This sounded amazing to me. What do you think? I know lenders are stumbling over each other to do deals but 6% on a vacation home?

2) Know of where I can find a resource that can verify if private party financing for a refinance is subject to rescission periods? My understanding is that rescissions apply only to federally insured/backed loans.

2. Rhonda Porter - March 30, 2007

Hi Tim,
If the property is a vacation home (true second home–approx. 50 miles from residence and “makes sense”) then it should have the same rate as an owner occupied. If it’s a rental (NOO), then the rate will vary quite a bit depending on LTV.

Regarding the private party financing, I’m not certain. I know the rescission applies to owner occupied homes (not NOO or vacation).

3. Jillayne Schlicke - March 30, 2007

http://www.ftc.gov/bcp/conline/pubs/alerts/3dayalrt.htm

http://www.access.gpo.gov/nara/cfr/waisidx_04/12cfr226_04.html

http://a257.g.akamaitech.net/7/257/2422/12feb20041500/edocket.access.gpo.gov/cfr_2004/janqtr/12cfr226.1.htm

Copy and paste from the last link:

(c) Coverage. (1) In general, this regulation applies to each
individual or business that offers or extends credit when four
conditions are met: (i) The credit is offered or extended to consumers;
(ii) the offering or extension of credit is done regularly;\1\ (iii) the
credit is subject to a finance charge or is payable by a written
agreement in more than 4 installments; and (iv) the credit is primarily for personal, family, or household purposes.

Tim, you will also need to check state law.

http://apps.leg.wa.gov/RCW/default.aspx?cite=19.86

http://apps.leg.wa.gov/RCW/default.aspx?cite=61.34.020

http://apps.leg.wa.gov/RCW/default.aspx?cite=19.146.020

Note from this last link, exemption 1d:
(d) Any person making or acquiring a residential mortgage loan solely with his or her own funds for his or her own investment without intending to resell the residential mortgage loans;

As always, consult your favorite real estate attorney for a legal answer.

These Q&As give rise to the need for a post on seller financing AND a separate post on private investor financing. This could be written from the perspective of escrow or from an attorney’s perspective, or both. Reader analysis: a homebuyer, a refinancing homeowner, and those in the industry who must work with private financiers.

Subprime products will not go away completely, they’ll just transform into new lending sources. We are, after all living and working in a capitalist system. When there is a challenge, new markets see the challenge as an opportunity.

Then, of course, we’ll need to see if all the old laws work with the new “opportunities.” Ah, mortgage lending…always transforming.

4. Seattle Mortgage Rates - May 18, 2007

Re: “If the property is a vacation home (true second home–approx. 50 miles from residence”

Who determines this ? I see so many differences. Hawaii can be a 2nd home market, Florida. i had a client who lives in California and claims a 2nd home in Maryland ( he works in Maryland in the summer. 2nd home is also defined as a resdience where you will be at least 60 days of the year.

5. Rhonda Porter - May 18, 2007

It needs to make sense to the underwriter. The guidelines that we work with at my company do not require 60 days of the year for a vacation property or second home. The examples you’re providing with homes in different states would meet the criteria of being a reasonable distance away from each other to be considered a second home.

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