What Disclosures, Rate Lock Docs Actually Req'd of DSCR Lenders?

2 Replies

Hi again BP,

I have an associated thread inquiring about DSCR lenders and have contacted all those lenders mentioned by posters to that thread and much appreciate the contributions.

What I am learning is that Portfolio/Private lenders don't have to make the same disclosures that lenders who resell to Fannie/Freddie must  make. There doesn't seem to be a GFE, Good Faith Estimate or TIL, truth in lending statement required. I've already had a conversation with a lender whose rate has moved up 50 basis points in the few days since we last spoke after telling me his rates rarely move at all. 

As this area isn't so regulated, how does one actually receive the" benefit of their bargain" if after committing to a loan, the different figures begin to drift those those understood as the agreement?

I understand one should do a rate lock at the time of application but how is the Private Lender also locked into the agreement without the required disclosures that regulated lenders must comply with? It still seems to be wild-west like. 

Nobody wants to be in a 4-6 week process only to learn the terms have changed on your very largest rental expense - when you're down to the wire - but those changes won't be to the borrowers advantage. I have also read of people doing multiple-applications as something of a safeguard. Of course you have to pay for multiple appraisals at a high rate so that would be costly insurance yet still not very assuring. 

How do investors protect themselves on a DSCR loan?

@Burt L. The GFE and TIL we’re consolidated into a Loan Estimate form about 6 years ago. If you are looking for those specific docs that might be a issue. If you are looking at lenders structuring loan as a business purpose loan that would mean they also don’t follow standard Respa-tila guidelines that are standard for residential and some other commercial loans.

@Burt L. Also as for rate move even on less rate sensitive markets substantial change in market over last three weeks so if they don’t have a lock option like traditional loan that move is not surprising.

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