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What Does Financial Reform Mean to Real Estate Investors?

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Services for Real Estate Pros

The ink is now dry on the 2300 page Financial Reform Bill, the most sweeping set of financial regulations to be passed into law in the U.S. since the 1930s.

The law will directly impact nearly every American, including Investors. There will be a new set of consumer protections and transparency in disclosures. Hedge funds and credit agencies will see new regulation. Many studies will be conducted and regulations written. Hundreds of new federal regulators will be hired and new agencies formed to oversee the mortgage and banking industries. It will take years before a full impact of this bill can be realized and assessed.

It’s possible to project some impacts that the new bill will have on real estate investing, even though it will be a while before most of the impacts are felt.

Once the new Bureau of Consumer Financial Protection is set up it will be able to regulate mortgage rates, determine whether particular types of mortgages are deemed too risky to be in the best interests of consumers, regulate market terms, and determine if mortgage documents are too complex to be easily understood. We will probably never again see the kind of investing environment such as was prevalent in the mid-2000 decade where Investors could buy into a pre-construction deal with virtually no money out of pocket. The buying frenzy in some of the boom communities like Phoenix, Cape Coral and Miami fed into the disastrous bust that came a few years later.

Finding all cash buyers will become even more critical to Short Sale and other transactional Investors in the future because loan requirements will be tightened. There will be fewer choices of lenders and fewer mortgage instruments available for buyers to pick from.

Owner financing has already been tightened up in the government’s effort to protect consumers from unregulated exotic types of loans. Investors who sell through owner financing will need to become licensed mortgage brokers, although for now it appears that lease op... Click here to read the rest of this article about financial reform and real estate investing

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