Is using a FannieMae instrument legal?

Question

I have seen private money lenders use FannieMae/FreddieMac documents for private money mortgages that are not associated with either one. Is this ok?  thanks.

Stephanie Medellin · Answer

I'm not sure how the lender would trick the borrower by using the forms - they wouldn't typically see the loan documents until the very end of the process, at closing, which should be handled by a title company or closing attorney depending on the state.  If you're unsure whether a lender is licensed to do business, or following lending laws, you might want to consider getting representation to look everything over.

Chris Seveney · Answer

@Martin A Phillips

Anyone can use their forms, for a private deal that is non owner occupied the deed of trust: mortgage is pretty standard but note typically has added language and other docs such as a personal guarantee or assignment of rents

Chris Seveney · Answer

@Martin A Phillips

Yes

You can use those and it is recommended in many instances for safe harbor - meaning a borrower cannot sue due to terms that are usury or illegal.

We use them all the time

Caroline Gerardo · Answer

You mean like the 1003? Or you are talking about riders to sign at closing? Any mortgage loan is still going to have disclosures, ins and outs, contractual agreements... Please be more specific with a question that we can answer. Are you speaking of conventional vs NonQM or vs hard money? Private money is a vague category.

Martin A Phillips · Answer

Everyone is deciding that I am the person acting illegally because I inquired about the legality of what I see others doing.

please stop the lectures.

Jeff S. · Answer

“so if an unlicensed lender wants to trick a borrower into seeing the loan as legit by using Fannie, Freddie or FHA approved mortgage notes and filling in blanks, is that legit use of those documents?”

The highlights are mine.

Lending is not for you, @Martin A Phillips.  You don’t “trick a borrower into seeing the loan as legit...” In fact, you don’t “trick” them into anything.  Not only is this NOT how you do business, but you will discredit yourself as you’ve done here, in my view.

Though an astute borrower will always ask their lender where they get their money, and especially if they sell their loans, most really don’t care (though they should).  You don’t seem to realize that you actually have a competitive advantage in that you will be the lender for the life of the loan and can provide accommodations larger lenders, who either sell their loans or accept investors, can’t.  Borrowers appreciate this if you market yourself appropriately.

In a prior post of yours, that I participated in, I believe you indicated you were from Nevada.  Here, you absolutely must be a licensed broker and also work from a brick-and-mortar office.  In your case, that means using a broker to originate your loans.  The last thing you need is to play the games you seem interested in and have a borrower contest your loan.  I guarantee a judge won’t look at you as some, “... guy with a trust fund lending money for private mortgages.” Not when you’re trying to trick people.

Instead, try lending with some integrity.  Why don’t you find a broker willing to originate your loans for you for a modest fee using their legally vetted loan docs?  (Of course, you realize that the loan docs downloaded from Fannie or Freddie are not a complete loan package. Yes?)  While you’re at it, you might speak to a lending attorney to learn the process in your state.  This would include a discussion on licensing, usury, paperwork, and representations.

Sorry to be harsh, but lending is way too easy to play these games, Martin A Philips.  I don’t know where you’re getting your advice, but you’re on the wrong track.

Martin A Phillips · Answer

I saw that on the Fannie website but that forms and documents page is generated by a link on the lender application for Fannie's approval to issue a Fannie-backed mortgage. I always took it as granting access to approved lenders.

I don't see any more or challenges to it though, and you're right, it seems most people use it.

Chris Seveney · Answer

It says right on the site you can use them, and others use them in case they ever want to securitize their loans they must be on this form.

Fannie Mae Legal Documents | Fannie Mae

Martin A Phillips · Answer

Not sure where you are seeing me say any of this is "my plan" but others have been helpful with more accurate information that was responsive to my original question.

Is using a FannieMae instrument legal?

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