As mortgages melt and credit crunches, loan transactions beyond the purchase or payment refinance of a primary residence are becoming increasingly difficult to qualify. Programs called expanded criteria and sub prime provided entry level rates that enabled borrowers affordable payments for an initial period; later to substantially increase to more traditional finance company rate structures.

 So now, as these hybrid loans become restrictive, borrowers have available an old financing option with some market-driven benefits.

Fixed income investors whose main objective is to maximize current income, have few choices when short-term interest rates are cut for the benefit of economic stimulus and the stock market declines.

Money market accounts and short- term CDs are half of what they yielded just one year ago. But one investment alternative that can yield two to three times that may be just beyond their own back yards.

You might consider this a form of community reinvestment as private lenders fund the residential mortgages that have become so illusive to borrowers.

This is a scenario where the individual lender makes a loan against the value of the property, and is comfortable receiving attractive monthly interest payments or, upon a borrower default, owning the property at an acceptable discount.

Borrowers benefit because they will pay an interest rate less than typical “hard money” rates [15 percent to 18 percent] because the yield curve is so historically low.

A well-structured, legally documented mortgage investment can be facilitated by a qualified mortgage broker and escrow officer.

So, as the storm clouds build, a silver lining may form for those willing to work together for a mutual benefit.

Credit Corner is written by Chris Seymour of Country Mortgage Corp. of Sedona, and appears each Friday in the Sedona Red Rock News.

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