Is it true that PPP is banned in PA for DSCR loan currently?

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Is it true that PPP is banned in PA for DSCR loan currently?

Hyeseong Park
Rental Property Investor · Philadelphia, PA · Member since 2023 · 68 posts · 18 votes

I saw some lenders in PA still do DSCR loans with PPP. And as my property is in PA, I want to hold & rent it with DSCR. Anyone can prove if that ppp banning is true for PA? If so, can I get sources to check?

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Nate HerndonPro Member
Lender · Springfield, MO · Member since 2023 · 277 posts · 195 votes
2y

Removing the PPP will be costly on rate, upfront points, or both. I'm still utilizing programs that allow for 3-year and 5-year prepays in PA. This helps the interest rate considerably,

[email protected]417-605-2196
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  • Brittany MinocchiBusiness Member
    Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
    2y

    It's lender-specific. Guidelines may vary based on property type and/or loan amount as well. 

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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2y

    Yes its lender specific, 

    But majority won't allow it. Maybe a local bank could allow it or a commercial lender 

    https://loanstreamwholesale.com/wp-content/uploads/2022/03/M...

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  • Alex BekezaBusiness Member
    Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    2y

    @Hyeseong Park You'll get way better rates with a PPP on there.  Whether or not it's enforceable is a question for your attorney. 

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  • Nate HerndonPro Member
    Lender · Springfield, MO · Member since 2023 · 277 posts · 195 votes
    2y

    Removing the PPP will be costly on rate, upfront points, or both. I'm still utilizing programs that allow for 3-year and 5-year prepays in PA. This helps the interest rate considerably,

    [email protected]417-605-2196
    2Reply
  • Derek BrickleyBusiness Member
    Lender · Ann Arbor, MI · Member since 2021 · 666 posts · 227 votes
    2y

    Hi Hyeseong:

    "Pennsylvania has a statute prohibiting prepayment penalties on residential mortgage loans (apparently only those under $50,000 on one- to two-family property) (41 P.S. § 101, 405) and another statute prohibiting them altogether on loans made by second mortgage licensees (7 P.S. 6612)."

    Although DSCR loans are a business purpose loan, the note is still in your personal name and a 1-4 unit is still residential. Anyone offering those may be trying to use a loophole, but I would make sure you vet them carefully.

    https://www.cga.ct.gov/PS96/rpt/olr/htm/96-R-1211.htm#:~:text=Pennsylvania%20has%20a%20statute%20prohibiting,licensees%20(7%20P.S.%206612).

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  • Alex Hunt
    Lender · Member since 2022 · 441 posts · 134 votes
    2y

    Hey Hyeseong, 

    Like others have mentioned it is lender specific. Feel free to send me a DM with any questions. 

    1Reply
  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    2y

    This is not a "banning" the laws are old for PA. Think of it this way ~ if it's a small loan lenders are going to tip toe around the law and make sure you as borrower don't refinance out of a loan in six months when they paid $10000 to set it up.

    Here are the law codes: 

    Loan Interest and Protection Law,  Pennsylvania
    41 P.S. § 101, 405    1-2 units under $50000 owner occupied

    7 P.S. 6612  Home Equity loans/ second trust deed lines

    BUT ~ HOWEVER:

    prepayment penalties are permitted for business purpose loans that secure real property with two or fewer residential units. The loan amount must be greater than $278,204. 

    A lender may also include a prepayment penalty in a covered loan if they also offer a loan product without a prepayment penalty. Prepayment penalties are only permitted during the first 60 months after the loan is executed. So for example they offer one with a three year prepay of 2% at 8.5% and one with no prepay at 11%  so they don't lose money on a short term deal.

    Covered loan means QUALIFIED Mortgage which DSCR is not a covered loan under QM it's called NON-QM

    Many DSCR don't do small loans under $150000 as they aren't profitable. Go read all the laws with High Cost/HOEPA. CFPB and government going after banks and lenders. A loan costs $10000 to set it up in all the employees and vendor apps and a percentages of loans don't close. No lender wants to be fined.





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  • Hyeseong Park
    OP
    Rental Property Investor · Philadelphia, PA · Member since 2023 · 68 posts · 18 votes
    2y
    Quote from @Nate Herndon:

    Removing the PPP will be costly on rate, upfront points, or both. I'm still utilizing programs that allow for 3-year and 5-year prepays in PA. This helps the interest rate considerably,

    Thanks for your detailed info, Caroline!

    So in short, lenders have to provide "no ppp option" for PA customers to provide "ppp option". Is that correct? If the lenders dont have "no ppp option", they cannot give any ppp option then? Just to clarify if I understood this.

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  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    2y
    Quote from @Hyeseong Park:
    Quote from @Nate Herndon:

    Removing the PPP will be costly on rate, upfront points, or both. I'm still utilizing programs that allow for 3-year and 5-year prepays in PA. This helps the interest rate considerably,

    Thanks for your detailed info, Caroline!

    So in short, lenders have to provide "no ppp option" for PA customers to provide "ppp option". Is that correct? If the lenders dont have "no ppp option", they cannot give any ppp option then? Just to clarify if I understood this.


    yes if the loan is over $278204. You will find there are few lenders who offer small DSCR loans under $200000 for PA. Small dollar amount might not fit what you want.

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  • Kip AdkinsBusiness Member
    Lender · Huntington Beach, CA · Member since 2018 · 10 posts · 4 votes
    2y

    The investor loans allow for a PPP in PA, that is the bridge and DSCR loans, as they are business purpose. This differs from lender to lender based on the lender's interpretation of the law. The lenders that specialize in business purpose financing all charge the PPP. The loan amount and property type limits on PPP in PA are based on consumer loans for owner occupied homes.

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  • Nate HerndonPro Member
    Lender · Springfield, MO · Member since 2023 · 277 posts · 195 votes
    2y
    Quote from @Caroline Gerardo:
    Quote from @Hyeseong Park:
    Quote from @Nate Herndon:

    Removing the PPP will be costly on rate, upfront points, or both. I'm still utilizing programs that allow for 3-year and 5-year prepays in PA. This helps the interest rate considerably,

    Thanks for your detailed info, Caroline!

    So in short, lenders have to provide "no ppp option" for PA customers to provide "ppp option". Is that correct? If the lenders dont have "no ppp option", they cannot give any ppp option then? Just to clarify if I understood this.


    yes if the loan is over $278204. You will find there are few lenders who offer small DSCR loans under $200000 for PA. Small dollar amount might not fit what you want.


    There are loan programs that I am utilizing for clients that still offer as low as $50k loan amounts in Pennsylvania. They do enforce a 5-year descending PPP.

    [email protected]417-605-2196
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  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    2y
    Quote from @Nate Herndon:
    Quote from @Caroline Gerardo:
    Quote from @Hyeseong Park:
    Quote from @Nate Herndon:

    Removing the PPP will be costly on rate, upfront points, or both. I'm still utilizing programs that allow for 3-year and 5-year prepays in PA. This helps the interest rate considerably,

    Thanks for your detailed info, Caroline!

    So in short, lenders have to provide "no ppp option" for PA customers to provide "ppp option". Is that correct? If the lenders dont have "no ppp option", they cannot give any ppp option then? Just to clarify if I understood this.


    yes if the loan is over $278204. You will find there are few lenders who offer small DSCR loans under $200000 for PA. Small dollar amount might not fit what you want.


    There are loan programs that I am utilizing for clients that still offer as low as $50k loan amounts in Pennsylvania. They do enforce a 5-year descending PPP.

     She wants conventional or NonQM with very low rates in Pennsylvania (PA has special laws different than GA)

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