Why do so many lenders exclude Vermont?

16 Replies

Not that the answer will change anything just bugs my curious mind.. looking at all options as I head towards a first purchase in the spring and it seems like private money is effectively not on the list for any terms since almost everyone, even the "nationwide" lenders do not work in the state.  Thinking it must be something in the laws that makes it too complicated/expensive to do business here?  Definitely not related to heating costs in the hard winter since just about everyone's money is good across the border in NH..

Right, I'm well aware of how our senator feels about people with money but not sure that he has a direct role here having spent mot of his career in national politics.  Either way I'm not really asking for Bernie Sanders commentary unless it is directly related to VT specific legislation that contributes to this.   There are many lenders on here, some focusing on New England area while still excluding Vermont.  Someone must have some firsthand insight?

my guess and totally a guess would be one or more of these reasons or a combination

1. NMLS licesned required  market to small to bother

2. foreclosures are a nightmare and expensive

3. market to thin

I've heard good recommendations for Lima One, unfortunately Vermont is one of six states in the country they will not lend to. After some digging looks like Lending Home is in the same boat with a smaller service area. I've gathered from browsing a few years-old threads that the REIA scene is pretty dead. It's not a big state but people do live here and a lot of them rent, I just don't get it.

I found the answer with a quick Google search. The quotes below are from a document published by the Vermont Attorney General's Office called "Illegal Lending: Facts and Figures". (http://legislature.vermont.gov/assets/Documents/2016/WorkGroups/House%20Commerce/Act%20199/W~Wendy%20Morgan~Vermont%20Attorney%20General's%20Office-%20Illegal%20Lending¦%20Facts%20and%20Figures~1-14-2015.pdf)

I added double asterisks around the section headers, since I can't bold text on my phone. Those header lines sum up the quick answers, then the paragraphs below provide more detail.

E. Vermont’s Regulation of Money Lending

**Lenders need a state license to solicit or make a loan.**

Vermont requires any person or entity which is not a state or federally chartered bank or credit union to obtain a state lending license from the Department of Financial Regulation, before making or soliciting a loan in Vermont. 8 V.S.A. §§ 2201, 2233(b). DFR is the supervisory agency for all such lenders. The purpose of Vermont’s licensing laws is “to protect consumers against unfair and unconscionable practices.” 8 V.S.A. § 10.

**Interest rates are capped at 24%.**

Vermont limits the rates of interest charged for money lending, at 12-24% per annum, depending on the type of loan. 9 V.S.A. § 41a(b). 18% is the typical interest rate that would apply to the kinds of loans offered by online lenders.
Violating Vermont’s interest rate caps carries a criminal punishment (misdemeanor) of up to $500 or six months’ imprisonment, as well as forfeiting the right to collect any interest or charges, and half the principal. 9 V.S.A. § 50(c).

**Vermont’s UNIQUE law imposes liability on other players in the web of illegal lending.**

In May 2012, the Vermont Legislature enacted a law that no other state has enacted to date: making illegal lenders and those who assist them directly liable under Vermont’s Consumer Protection Act. 9 V.S.A. § 2481w.

First, it is a direct violation of the Consumer Protection Act for a non-bank lender to solicit or make a loan without being licensed and in compliance with all lending requirements (including interest rate caps) contained in Title 8 of the Vermont Statutes Annotated. 9 V.S.A. § 2481w(b).

Next, it is a violation of the Consumer Protection Act for a payment processor to do any financial processing on behalf of unauthorized lenders. 9 V.S.A. § 2481w(c).

Lastly, it is a violation of the Consumer Protection Act for “any person” to provide “substantial assistance” to an unauthorized lender, once that person is aware (or should be aware) that the lender is not in compliance with Vermont law. This provision does not apply to the consumer’s financial institution. See 9 V.S.A. § 2481w(d) for the full text of this provision.

The Consumer Protection Act provides for direct enforcement by the Attorney General and strong remedies, including consumer restitution, civil penalties of up to $10,000 per violation, and injunctive relief.

@Matt Vezina   Hi Matt - there are plenty of local banks that actively lend in your area: Union Bank, Lake Sunapee, Northfield Savings Bank, VT State Credit Union, to name a few.  I started off with big national banks in the beginning but found the local banks know the area far better.

Good luck!

- Tom

   

@Tom S. Thanks for the suggestions, it's been my general impression that I'll have better chances at a local institution. Although interestingly I was talking to a loan officer at Heritage Family Credit Union which holds my savings account and her opinion was that they were more strict than national banks.  Do you know any of these institutions well enough to venture a guess at where I might have the best chances with a spotty income/employment history?  Have 790+ FICO, about $30k reserves and will be at least six months into a steady 36-45K job when I apply but tax returns for the last few years are a basket case from low income while I got 20s wanderlust out of my system on long hiking trips.  Priorities have changed and I'm ready to start the next chapter but I fear the average lender will say "not so fast" when they see my recent income history.  That's what originally got me looking for private lenders, basically a bridge option to get rental income established while my W2 stabilizes enough to qualify for a refi.  

Hi Matt -

I'm not quite in the same boat because I've had the same W2 for a few years, but I also don't match your savings. I haven't purchased yet but was pre-approved for a mortgage via Buddy Singh at Spruce Mortgage, I think they are based out of Boston but have a Burlington office --- my only problem was that they aren't included on the list of approved lenders that allow you to use the VHFA down payment loan assistance (if you have 30k you potentially don't need this, just something to consider). Maybe it was mostly based on my W2, but they definitely consider the potential rental income also. I'd at least call and discuss. I was also recommended Ronnie Ryan from VT Mortgage Company but their line was busy when I called and Buddy's wasn't, haha - talk to them both and see what they recommend? I don't know that I can post their phone numbers here but you should be able to google them.

Megan

Also - if you're close enough, why not consider investing in New Hampshire instead of Vermont and use a private lender?They have considerably lower unemployment, are more business friendly, and it's a much better tax scene. I'm not sure how that would work if your address was still in VT (I worked in NH but lived in VT a few years ago - had to pay in quite a bit that tax season!) but something to think about.

Matt, I'm a real estate agent in the area and have had good luck finding financing with Josh Bennett of Title a mortgage Solutions in Hanover, or with Kim Magoon of HomeBridge in Barre. Give me a call and I can connect you with them and maybe show you and and few places. The high reserves and credit score are helpful, and the spotty employment may not be a huge issue if you are looking for a multi with consistent income, as they will include that income with yours for qualifying. Send me a message if you need their contact info or mine, I'd love to help walk you through this.  

@Megan Phillips Thanks for the suggestions, I've heard that with a unique financial situation I may do better with a broker who has more options.  I've heard of both Spruce and VT Mortgage co.  will consider them when the time comes.  As far as why not NH it really only pertains to owner occupying this first purchase.  I work in Marshfield (If you're driving along rt. 2 and pass the sugarhouse under construction south of the town center, that's me!) and a half hour is about the max commute time I'm willing to entertain.  That has me mainly looking at Barre & Saint J, seems like any significant population center in NH is gonna be a little longer on the commute.  After this first one I'll go anywhere in the area if it makes more sense, I've looked at a lot of stuff in both NH and MA.   

@Samantha Hiscock Appreciate your suggestions too, I've heard you mentioned before as an investor friendly agent.  Working in the maple business my highest earning months of the year will be roughly January-mid April so I'm planning to purchase after the sugaring season.  No use rushing to purchase now right before having a lot more cash at my disposal, and I currently have a room in employee housing for about $300 a month so I'm set for the winter.  With that in mind I wouldn't want to waste time having you show me places right now but I will definitely be in touch when the time comes.   I sent you a colleague request a little while back but maybe it fell through the cracks.  

Damn, I didn't even see the colleague requests. Some of my BP email goes to my spam folder, super annoying! 

Anyway, Barre is my local market, I have been living and investing here for about 8 years, started by house hacking a quadplex. We just bought another duplex here last month. I would love you show you around, there are always decent owner occupy options. Properties are relatively inexpensive and rents are high. Plenty of duplexes and a few tris and sometimes quads. Alot of the units are outdated and have great value-add opportunities. Let me know when you are ready and we can start your search! 

@Matt Vezina, I'm a little late to this thread but I would also give New England Federal Credit Union a shout. I used their 5% down ARM loan (capped for adjustments) and had a great experience with them. I purchased the duplex I live in with this program. Our other duplex, I utilized a commercial loan (required 20% down for a 2 family) also from NEFCU. Phenomenal experience on both the residential and commercial sides. The closing fees were lower then other banks- I recently went to refinance out of our ARM loan and just couldn't pull the trigger when I saw closing fees of $5,000, if I remember correctly, the bank fees associated with closing were more then double. Give me a shout if you have any questions.