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New eligibility rules for small creditors 

Estimated reading time: 1 minutes, 53 seconds

Investing in private lending secured by real estate is a popular method of investing with Self-Directed IRAs. The Consumer Financial Protection Bureau (CFPB) has recently updated its regulatory implementation page with a couple of resources related to loans secured by mortgages.

If your IRA makes loans secured by real estate, you may want to discuss these developments with your legal advisors to see if they might apply to your portfolio.

The first resource is a one-page fact sheet for small creditors operating in smaller areas. This simple, easy-to-read document defines “small creditor” and the concept of “operating in a rural or underserved area.” Because of recent rules changing the small creditor and rural-or-underserved tests from the CFPB, it is imperative that potential creditors review the changes before submitting an application to designate an area as rural.

The second resource focuses on the eligibility of a creditor to make different types of qualified mortgages under 12 CFR Part 1026, which is known as Regulation Z. It’s important to know that the eligibility requirements vary significantly across the types of qualified mortgages covered in the document.

Loans secured by mortgagesThe CFPB site is packed with other resources that might prove beneficial to your due diligence efforts should you wish to invest in a Private Lending IRA backed by mortgages.

Click here to read the currently effective Regulation Z. It covers mortgage-specific topics like loan disclosures, servicing requirements and appraisal requirements. You may also read the Federal Reserve’s final narrative on the Truth in Lending Act, which was implemented by Regulation Z.

Always perform the proper due diligence prior to executing an investment. The proper research and vetting of any potential investment, anything from a small private loan to a large commercial real estate purchase, can save you now and perhaps down the road upon retirement. Build a team of professionals knowledgeable in the asset classes in which you wish to invest, and maximize their expertise when considering what type of account to open, which investments are right for you and so on.

Kingdom Trust is well-versed in Self-Directed IRA rules and regulations and understands alternative asset investments like Private Lending IRAs and Real Estate IRAs. We’d be happy to walk you through the process of opening a Self-Directed IRA. Simply contact us today to get started.

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