What is Dodd-Frank?
“Dodd-Frank” is often a scary term used to describe consumer protections which went into effect in 2010. The primary thrust of these protections were amendments to the Truth in Lending Act (TILA), a seminal consumer protection law.
Relevance to Business Purpose Lenders
The Truth in Lending Act and the Dodd-Frank amendments are mostly irrelevant to business purpose lenders regardless of the collateral they choose to secure their loans. Examples include rental property loans and fix and flips.
Bridge Lenders Beware
Private lenders who make consumer bridge loans, i.e. short term loans which are secured by the new or former primary residence of a borrower to help “bridge” the gap and facilitate the sale of their former primary residence after the purchase of a new primary, must be cautious. The Dodd-Frank amendments to TILA made significant impacts and created a web of exceptions to applications.
Consumer Loans – Watch for TILA
All loans which are made primarily for personal, family, or household use (i.e. consumer loans), which are secured by any real estate, necessarily have some TILA compliance.
Biden Admin’s Impact
There is expectation that the Biden administration will expand consumer lending rights and may well encroach on investment purpose loans for the purposes of establishing and promoting racial equity/parity.