I defer to my expert lender, John Meussner for the answer.

    Oh wait, that's you!

That's a new one on me - interesting though

Well, this is interesting.  I have not heard of this that's why it's good to have connections with knowledgeable mortgage professionals.  Like you, of course.  

Slick and creative inducement. This industry is always using new gimmicks, and they work in catching the fish.

Interesting concept aka inducement.  Tell us more.

INDUCEMENT?

How about when builder give  the buyer closing costs, appliances, window treatments, and other perks ONLY IF...

They use the builders preferred lender or affiliate, and their very own title company.

I am willing to bet that in order to get them to pay $13k for student loans buyer MUST USE BUILDERS LENDER AND TITLE COMPANY.

Steering and violation of RESPA...because the buyer always pays for the title insurance, but the builder always say that they are paying it...not so in most cases.

Sure, they will get by with it because no one complains...

Eve

I suppose it's how they define the discount/application of same.
The bigger question in my pea brain is: would 13k even make a dent in some of those fat debts?

If it's legal, it's legal.

I read that article last week & was actually hoping one of you LO's would answer that question. I took it as closing costs that obviously have to be on the HUD but ??  

What's the difference between an inducement TV or student loan? I'm sure the lender will pay that debt directly.

Interesting....

Just a new way to phrase a discount, helps those in that situation to visualize the discount.

Money has come from many sources in the past to get the ratios within lender parameters. For years 'Rent to own' and 'Lease option' were such tools until many states outlawed that practice.

Prepaids, buy downs, dowmpament assistance or any mechanism to make a debt disappear.

Solutions are great inducements. And we are all in the solutions business.

It seems to me a repackaging of what every lender can do and adaptation to emerging problems.

I would think it would be a great inducement for many first time home buyers.

I don't think it matters if the money goes toward student loans or appliances. If the builder is "paying" and then requiring them to use a particular lender, then I disagree with the practice because there is a good chance the builder is getting something in return from that lender.

Mary Yonkers nailed this one!

To me it is an inducement. I had a buyer ask the other day for the builder to buy out their lease to the tune of $3400 plus pay almost $10000 in closing costs and provide a new refrigerator and $3000 in fencing. Some buyers are just plain crazy and this builder did not bite.

I TOTALLY agree with you, John Meussner - it is inducement any way you look at it!

ASK RESPA

If it's a VA Loan ???

I know builders have given away cars as long it stays within certain guidelines on the maximum amount. I like the idea and wish it it legal.

I work for Eagle, it's the builder side, not Eagle BUT builders gave incentives for 30 years in this business- a free pool, landscaping, upgrades, 3 - 2 -1 buy down, better pricing, $10000 to go with our in-house...  its legal. Buyer can go with Wells or Chase. Limit on amount, limit on FEDERAL student loans as money goes directly to them not buyer, limit on time frame, limits and ins and outs are pages long

Eagle is a fantastic company and we have products for everyone. This is a needed one as college graduates are stuck with a boulder saddle of debt on their back and they can't qualify for QM loans. John Meussner   :) 

I read about that this morning, and it raised MY eyebrows. For some debts $13K is almost chump change

why do they need to do that in  a sellers' market?? we're selling new homes before the board is hung inside....  one is going together and the foundation is not in yet!!!!  no inducements necessary...

An interesting promotion.

I don't know... you tell me, John. I saw that announcement myself earlier today.

That is an attractive scenario. Their lawyers are very creative to pull this through. 

Interesting.   Is this really any different than paying closing costs for the buyer?

It is sort of like a buy-down, price reduction and discount in principal. It also has marketing kick to it and it addresses the student trillion dollar debt loan program problem quite nicely and at the same time promotes home ownership. Win-win-win...brilliant. Everyone from employers to supermarkets should be offering these incentives to help the students

Interesting.

It definitely sounds like it is leaning towards the gray area!  

With 20 years working for builders, I've seen things like this. I'd need to see more details but in the past stuff like this was done "off the HUD" if you know what I mean. Today that is harder and is usually just a great way of using the 3% sellers help the builder is allowed to give on most financing products. By paying that towards the student loan, it's great because that is debt that the lender will no longer need to include in their ratios. Everyone wins. The buyer gets rid of student loans, the lender gets the buyer to qualify for more, and the builder gets to sell more. I'm also sure this is probably only possible with the builder's prefered lender, as there may be some behind the scenes mechanics needed to make this work, and some may be a contribution from the lender, such as buyers credit instead of a fee paid to the builder under some sort of "Marketing Agreement" that may exist!

Bottom line, I but that "we'll pay your student loans" get prospects into the models and 95% who buy probably switch and say, use that money for cash I need to move in, instead of actually paying the loans for them.

Because their lobby is stronger than our lobby and they paid off someone's vacation to get the votes for this to happen.

I believe you answered your own question John. Gimmicky, yes, illegal, no.

Good question.  I'll leave this to the experts.

L has always tried pulling these ploys. Just like there 7-7-7 deal. $7 down, to buy a home; what a scam!

I have no idea.