We stopped HUD’s assault on seller installment sales by flooding them with over 5,000 protests.
Now the new Consumer Financial Protection Bureau is considering severe restrictions on them.
The deadline to protest has passed (July 22, 2011). See snipurl.com/AbilityToRepay to read the comments (scroll down that page for the comments link).
However, you can still leave your comments on this page — scroll down to “Leave A Reply” — and we will forward them to the CFPB if appropriate.
Listen to a Replay of the Tele Seminar Click Here
Letter from US Rep. Martin Heinrich (D, NM) to Fed Chairman Ben Bernanke supporting seller installment sales
Update Tues. July 19: For those few of you who think that this doesn’t affect individual sellers, I just received this:
“NAR (National Assn. of Realtors) sent me an email today saying that they are going forward with a comment because they feel seller financing is subject to the new rule ‘ability to repay.’”
– Ric Thom, President, Security Escrow www.securityescrow.com
From THE PAPER SOURCE JOURNAL, July, 2011:
The Federal Reserve, which received sweeping new authority under the Obama regulatory reauthorization, wants to effectively eliminate seller-held (a.k.a. purchase money) mortgages. It will do this by enacting a rule for the Dodd-Frank Act prohibiting property sellers from taking back a mortgage unless the buyer essentially can qualify for conventional financing!
What’s more, Ma and Pa Homeowner, who create 95% of seller-held mortgages, won’t be able to qualify buyers under the same underwriting standards that banks are required to perform, and therefore the cash flow notes won’t be created.
If this is enacted it also will remove access to housing for millions of Americans, because seller “financing” is the only way people who can’t qualify for conventional loans can buy a house.
We have precious little time to try to stop this. The deadline to comment is FRIDAY, July 22. See the information below, then go to snipurl.com/AbilityToRepay
Please do it TODAY!!
With your help, the Fed may at least decide that this does not apply to private transactions. Urge them to exempt seller installment sales from the rule.
(Thanks to Ric Thom [www.SecurityEscrow.com] for alerting us.)
Here Are Some Points You Can Make In Your Comments:
- Seller “financing” provides housing for millions who otherwise could not qualify for conventional loans.
- Homeowners are not bank officers or mortgage lenders. By requiring them (many if not most of whom who take back a mortgage are elderly) to qualify buyers using bank standards means they will simply refuse to sell with owner financing. Thus millions of people will be deprived of home ownership.
- Why should the buyer be required to divulge their income and assets to the very person with whom they are negotiating the terms of a sale? This is not required when there is a 3rd party lender.
- Requiring the buyer to turn over all their financial information to a stranger opens the door for identification theft and fraud.
- This also creates the opportunity for predatory borrowing. This is where an unscrupulous buyer knowledgeable about the Dodd-Frank Act leads an uninformed seller (and this will be the majority of sellers) into negotiations not in compliance with the ability-to-repay requirements. (An example of that could be a balloon, an interest rate greater than 1.49% above a standard mortgage, or the seller did not know how to calculate the income-to-debt ratio correctly, or know what residual income means). That buyer lives in the property trying to resell it for a profit and if they are not successful within three years they rescind the sale and get all their money back.
- By not allowing them to negotiate a balloon payment, there is a good chance that a seller 55 years or older will die before receiving all their equity. A lot of seniors have invested in real property with the intent of selling it using seller financing (an installment sale) in order to supplement their income in retirement, but also with the hope that they would not be stuck with a 30 year investment. The Dodd-Frank Act does the same thing insurance companies do who sell 30 year annuities to seniors. Our government has criticized this deplorable practice because seniors will die before they receive all their investment.
- The restriction of no balloon doesn’t affect just seniors, it has financial consequences for anyone using seller financing. Under the Dodd-Frank Act community banks are allowed to originate fully amortizing loans with a five year balloon. The rationale is that they hold these loans in their own portfolios and the government recognizes their need to hedge against inflation and rising interest rates. Yet, the Act does not recognize that private property owners who have 100% skin in the game need the same protection. A five year balloon is predatory lending. If there has to be a restriction it should at the very least be the same allowance given to community banks of a balloon in 5 years.
- There are a lot of small builders that have a spec house or two that they can’t sell unless they offer great terms using seller financing. Otherwise they have to let these properties go back to the bank, which does not help housing or the economy.
- It has been said that a seller financing the sale of his or her own property would completely avoid the issue of licensing by retaining the services of a licensed loan originator. If a mortgage loan originator (MLO) fails to properly follow the ability-to-repay guidelines the buyer still has three years in which to rescind the sale which leaves the seller at risk and will most likely bankrupt them.
Some people are missing the point in their comments. I have seen where people have said the Truth-in-Lending Act only applies to businesses, not Ma and Pa, and that seller financing will not be affected by the new proposed rule on the buyer’s ability to repay. It doesn’t make any difference if it does or doesn’t.
This week the Federal Reserve will be passing comments on the rule to the Consumer Financial Protection Bureau (CFPB) along with its authority to create the final rule for Truth-in-Lending. The Bureau will then also have the authority to create new rules for seller financing. You’re only allowed to offer seller financing for no more than 3 properties in a 12 month period if you meet certain conditions. One of those conditions is that the “loan meets other criteria set by the Federal Reserve Board” who is passing that authority to CFPB. There is nothing to stop CFPB from saying, ”Let’s don’t reinvent the wheel when it comes to the buyer’s ability to repay and seller financing. Let’s just use the rule we use to define ability to repay under the TILA”.
I feel it is essential that we send our comments speaking out against using any portion of this proposed rule on the ability to repay when it comes to defining the standard on seller financing to the Federal Reserve Board so they get passed on to CFPB.
When the SAFE Act came out it was unclear whether or not you could use seller financing on property other than your personal residence. I was told by a regulator that HUD was stunned by the 5,000+ comments we all sent. Their final rule says you can use seller financing on any of your properties. We need to make sure that CFPB hears our concerns before they consider what the new standard for the ability to repay will be under seller financing.
– Ric Thom, President, Security Escrow www.securityescrow.com
A sample letter you can use <http://www.nationalreia.com/federal-reserve-seeks-comments-regarding-seller-financing/> that was developed by National REIA is available online. Submit this to your US representative and senators as well as submit as part of the proposed rule comments.
By Ric Thom, www.SecurityEscrow.com
The Dodd-Frank Act does not exempt property owners who wish to use seller financing (installment sale) even though no money is lent, there is no table funding, and under the Truth and Lending Act they are not considered creditors. The Dodd-Frank Act (ACT) does exempt property owners who offer seller financing from having to become Mortgage Loan Originators (MLO) provided they only sell 3 properties or less in a 12 month period and they follow the restrictions below. Yet, the Act subjects the property owner to the same liability as an MLO:
Title XIV Section 1401 (2) (E)
1. The seller did not construct the home to which the financing is being applied.
2. The loan is fully amortizing (no balloon mortgages allowed).
3. The seller determines in good faith and documents the buyer has a reasonable ability to repay the loan.
4. The loan has a fixed rate or is adjustable after 5 or more years, subject to reasonable annual and lifetime caps.
5. The loan meets other criteria set by the Federal Reserve Board.
Under this Act the only buyers who will be able to use seller financing are the buyers who can already qualify for conventional financing with perhaps the exception of how much of a down payment they need.
Seller financing has always been the alternative to government regulated financing. It is a meeting of the minds between two private individuals who negotiate an arm’s length contract to purchase property using an installment sale.
The following is a breakdown of these restrictions. I listed them in order of greatest impact on property owners, buyers and the economy:
The seller determines in good faith and documents the buyer has a reasonable ability to repay the loan.
The implication is that the seller must use the ability-to-repay underwriting requirements when offering seller financing consistent with the Dodd-Frank Act which amends the Truth in Lending Act. This new, proposed rule is 169 pages long: snipurl.com/fedrule
The Consumer Financial Protection Bureau has spent a lot of energy developing a new, easy to read, two page mortgage disclosure form. It is unreasonable to expect sellers and buyers to fully understand and apply this 169 page rule. If buyer’s and seller’s negotiations deviate in the least the buyer has up to three years to rescind the sale and demand back all money paid to the seller, or anyone that the seller might have assigned rights and interest to, or any bank that takes the note as a collateral assignment.
This could be financially devastating to the seller. Let’s not forget that today’s buyer will be tomorrow’s seller. These sellers are a diverse group. They come from all walks of life: low income, high income, non-English speaking, seniors, widows, minorities, but this requirement places the same standards on individuals as banks and mortgage lenders, only with more risk – the banker is in the business of mortgage loan origination and factors that risk into his business plan, whereas the individual seller does not have capital reserves and doesn’t do this as a business. Also, unlike a bank, they do not carry errors and omission insurance.
Unlike banks and mortgage lenders, both the buyer and seller are consumers. They should both be equally protected. The buyer is purchasing real property and the seller is investing in/creating a financial product where they receive their equity over time. The seller is relying on the buyer to make monthly payments and maintain and protect the property. Terms are not dictated to either party, but rather they are negotiated between the parties.
Requiring the buyer to turn over all their financial information to a stranger opens the door for identification theft and fraud.
Furthermore, why should the buyer be required to divulge their income and assets to the very person with whom they are negotiating the terms of a sale? This is not required when there is a 3rd party lender.
This also creates the opportunity for predatory borrowing. This is where an unscrupulous buyer knowledgeable about the Dodd-Frank Act leads an uninformed seller (and this will be the majority of sellers) into negotiations not in compliance with the ability-to-repay requirements. (An example of that could be a balloon, an interest rate greater than 1.49% above a standard mortgage, or the seller did not know how to calculate the income-to-debt ratio correctly, or know what residual income means). That buyer lives in the property trying to resell it for a profit and if they are not successful within three years they rescind the sale and get all their money back.
The SAFE Act does not put in place the ability to repay requirements, or any other requirements, unless the individual habitually and repeatedly uses seller financing in a commercial context. It is HUD’s position that Congress never intended under the SAFE Act to restrict private property owners from using seller financing, unless they did it as a business.
The loan is fully amortizing (no balloon mortgages allowed).
By not allowing them to negotiate a balloon payment, there is a good chance that a seller 55 years or older will die before receiving all their equity. A lot of seniors have invested in real property with the intent of selling it using seller financing (an installment sale) in order to supplement their income in retirement, but also with the hope that they would not be stuck with a 30 year investment. The Dodd-Frank Act does the same thing insurance companies do who sell 30 year annuities to seniors. Our government has criticized this deplorable practice because seniors will die before they receive all their investment.
The restriction of no balloon doesn’t affect just seniors, it has financial consequences for anyone using seller financing. Under the Dodd-Frank Act community banks are allowed to originate fully amortizing loans with a five year balloon. The rationale is that they hold these loans in their own portfolios and the government recoognizes their need to hedge against inflation and rising interest rates. Yet, the Act does not recognize that private property owners who have 100% skin in the game need the same protection. Obviously the Act does not recognize that a five year balloon is predatory lending. If there has to be a restriction it should at the very least be the same allowance given to community banks of a balloon in 5 years.
The loan has a fixed rate or is adjustable after 5 or more years, subject to reasonable annual and lifetime caps.
This restriction is reasonable, but it will eliminate the ability for any buyer to wrap an existing obligation that has an adjustable rate even if they believe they can afford any rate increase. This is again inconsistent with the SAFE Act.
Moreover, if the seller does not know about the ability-to-repay requirements and that they are not able to have a balloon, they certainly will not know that you have to have a fixed interest rate for the first five years.
The seller did not construct the home to which the financing is being applied.
There are a lot of small builders that have a spec house or two that they can’t sell unless they offer great terms using seller financing. Otherwise they have to let these properties go back to the bank, which does not help housing or the economy. There is also that group of unemployed construction workers who built their own homes when times were good and now need to sell. This takes away their ability to use seller financing.
Builders are in the business of building; not of originating loans.
Using a mortgage loan originator to facilitate a seller-financed transaction creates additional risk and expense for both the buyer and the seller. It has been said that a seller financing the sale of his or her own
property would completely avoid the issue of licensing by retaining the services of a licensed loan originator. If a mortgage loan originator (MLO) fails to properly follow the ability-to-repay guidelines the buyer still has three years in which to rescind the sale which leaves the seller at risk and will most likely bankrupt them.
Furthermore, there is no provision in a MLO’s errors and omission insurance that covers seller financing. None of the continuing education classes or the exams that an MLO must complete has a single chapter or question regarding seller financing.
Who is supposed to pay the MLO? MLOs can charge a flat fee or up to 3% of the transaction. The only advertisements I have seen so far advertise a flat nonrefundable fee of $450. This fee has to be paid in advance, which makes sense, because why would a MLO spend hours and hours on an installment sale transaction which might not close? If the buyer pays the fee, then this is a forced origination fee never before imposed on buyers seeking seller financing. Why should the buyer have to pay money just to have an offer presented to the seller?
A lot of buyers use seller financing because they are low income individuals, and seller financing, up to now, has been an inexpensive way to purchase property. If the seller pays they will have to pay money for the simple act of the MLO forwarding them the installment sale offer. If the seller receives multiple offers this could easily run into thousands of dollars in MLO fees just to sell their property.
A lot of sellers are also low income individuals. The MLO will have to be a part of every offer and counteroffer because the sale and terms of an installment sale are one and the same and cannot be separated. For instance, the buyer might be willing to pay a higher interest rate if the seller is willing to come down on the price and down payment.
A lot of seller financing takes place in rural areas that are underserved by mortgage lenders and banks. It is going to be very difficult to find a MLO in those areas who are also willing to take the risk facilitating a seller financed transaction.
This has the potential of pushing seller financing underground – not a desirable result.
The Dodd-Frank Act allows a property owner to use seller financing without having to become a mortgage loan originator as long as they don’t use it more than three times in a 12 month period and comply with the above restrictions. In the SAFE Act there are no restrictions to the number of times seller financing can be used as long as you are not in the business of being a mortgage loan originator. The coauthor of the Dodd-Frank Act, Representative Barney Frank, sent a letter to HUD on July 22, 2010 urging it to place the maximum amount of seller transactions that an individual could do before becoming a MLO, or
having other restrictions on them, at five in a 12 month period. I would propose that the Dodd-Frank Act adopt that same number and place no restrictions on seller financing until 5 is surpassed. The only restrictions that should apply to 5 or less are those restrictions that the states already impose either through state statute or case law.
Under The Act loan officers at community banks do not have to become a Mortgage Loan Originator if they originate 5 or less transactions in a 12 month period. The rationale is that this is burdensome, costly and there is not enough volume to create a systemic risk. Ma and Pa on Main Street should be granted those same allowances. The Act puts more restrictions and risk on Ma and Pa than it does on financial institutions.
In watching the debates in Congress last summer it was repeatedly said that the Wall Street Reform and Consumer Financial Protection Act would not negatively affect or over-regulate Ma and Pa on Main Street. If this doesn’t negatively affect and regulate seniors, minorities, and lower income individuals on Main Street I don’t know what does. These restrictions will all but do away with seller financing, which will have a negative impact on housing, existing property owners, those desiring to be property owners and the economy.
Ric Thom is owner and president of Security Escrow Co. He is recognized as one of the leading authorities in seller financing on real estate contracts.
www.securityescrow.com
I do not agree with this concept of controling someone’s RIGHT 2 HOMEOWNERSHIP!
This is is very political, and downright out of control…this must be stopped and/or this proposal “must” be elimenated!!
This is very POLITICAL…I do not agree with this Proposal….this proposal “must be eliminated!!” SIMPLY PUT!!!
The proposed rules under Regulation Z of the Dodd-Frank Wall Street Reform and Consumer Protection Act should ONLY be applied to commercial lenders and Wall Street’s crooked companies. These are the people responsible for the mortgage mess, not the private property owners. Saying that you are going to clean up the mortgage mess and prevent future abuse, by smashing down on private sellers, would be like the president of Walt Disney promising to fix the rides at EPCOT by repainting the executive washrooms at their Corporate headquarters.
The revisions to the regulation would effectively eliminate seller-held (a.k.a. private purchase money) mortgages, by prohibiting property sellers from taking back a mortgage, unless the buyer can essentially qualify for conventional financing. Ma and Pa Homeowner, who create most of seller-held mortgages, won’t be able to qualify buyers and the cash flow notes won’t be created. This will remove access to housing for millions of Americans, because seller financing is the only way they can buy a house.
Congress never intended under the SAFE Act to restrict private property owners from using seller financing, unless they did it as a business. The SAFE Act does not have any ‘ability to repay’ requirements, or any other requirements, unless the individual uses seller financing in a commercial context.
I urge the Fed to exempt seller installment sales created by private transactions from these rules.
To whomever it May Concern:
The Dodd-Frank Act does not exempt property owners who wish to use seller financing (installment sale) even though no money is lent, there is no table funding, and under the Truth and Lending Act they are not considered creditors. The Dodd-Frank Act (ACT) does exempt property owners who offer seller financing from having to become Mortgage Loan Originators (MLO) provided they only sell 3 properties or less in a 12 month period and they follow the restrictions below. Yet, the Act subjects the property owner to the same liability as an MLO:
Title XIV Section 1401 (2) (E)
1. The seller did not construct the home to which the financing is being applied.
2. The loan is fully amortizing (no balloon mortgages allowed).
3. The seller determines in good faith and documents the buyer has a reasonable ability to repay the loan.
4. The loan has a fixed rate or is adjustable after 5 or more years, subject to reasonable annual and lifetime caps.
5. The loan meets other criteria set by the Federal Reserve Board.
Under this Act the only buyers who will be able to benefit from seller financing are the buyers who can already qualify for conventional financing with perhaps the exception of how much of a down payment they need.
Seller financing has always been the alternative to government regulated financing. It is a meeting of the minds between two private individuals who negotiate an arm’s length contract to purchase property using an installment sale.
The following is a breakdown of these restrictions, listed in order of greatest impact on property owners, buyers and the economy:
The seller determines in good faith and documents that the buyer has a reasonable ability to repay the loan.
The implication is that the seller must use the ability-to-repay underwriting requirements when offering seller financing consistent with the Dodd-Frank Act which amends the Truth in Lending Act. This new, proposed rule is 169 pages long: http://snipurl.com/fedrule
The Consumer Financial Protection Bureau has spent a lot of energy developing a new, easy to read, two page mortgage disclosure form. It is unreasonable to expect sellers and buyers to fully understand and apply this 169 page rule. If buyer’s and seller’s negotiations deviate in the least the buyer has up to three years to rescind the sale and demand back all money paid to the seller, or anyone that the seller might have assigned rights and interest to, or any bank that takes the note as a collateral assignment.
This could be financially devastating to the seller. Let’s not forget that today’s buyer will be tomorrow’s seller. These sellers are a diverse group. They come from all walks of life: low income, high income, non-English speaking, seniors, widows, minorities, but this requirement places the same standards on individuals as banks and mortgage lenders, only with more risk – the banker is in the business of mortgage loan origination and factors that risk into his business plan, whereas the individual seller does not have capital reserves and doesn’t do this as a business. Also, unlike a bank, they do not carry errors and omission insurance.
Unlike banks and mortgage lenders, both the buyer and seller are consumers. They should both be equally protected. The buyer is purchasing real property and the seller is investing in/creating a financial product where they receive their equity over time. The seller is relying on the buyer to make monthly payments and maintain and protect the property. Terms are not dictated to either party, but rather they are negotiated between the parties.
Requiring the buyer to turn over all their financial information to a stranger opens the door for identification theft and fraud.
Furthermore, why should the buyer be required to divulge their income and assets to the very person with whom they are negotiating the terms of a sale? This is not required when there is a 3rd party lender.
This also creates the opportunity for predatory borrowing. This is where an unscrupulous buyer knowledgeable about the Dodd-Frank Act leads an uninformed seller (and this will be the majority of sellers) into negotiations not in compliance with the ability-to-repay requirements. (An example of that could be a balloon, an interest rate greater than 1.49% above a standard mortgage, or the seller did not know how to calculate the income-to-debt ratio correctly, or know what residual income means). That buyer lives in the property trying to resell it for a profit and if they are not successful within three years they rescind the sale and get all their money back.
The SAFE Act does not put in place the ability to repay requirements, or any other requirements, unless the individual habitually and repeatedly uses seller financing in a commercial context. It is HUD’s position that Congress never intended under the SAFE Act to restrict private property owners from using seller financing, unless they did it as a primary business.
The loan is fully amortizing (no balloon mortgages allowed).
By not allowing seller financers to negotiate a balloon payment, there is a good chance that a seller 55 years or older will die before receiving all their equity. A lot of seniors have invested in real property with the intent of selling it using seller financing (an installment sale) in order to supplement their income in retirement, but also with the hope that they would not be stuck with a 30 year investment. The Dodd-Frank Act essentially does the same thing insurance companies do who sell 30 year annuities to seniors. Our government has criticized this deplorable practice because seniors will die before they receive all their investment.
The restriction of no balloon doesn’t affect just seniors, it has financial consequences for anyone using seller financing. Under the Dodd-Frank Act community banks are allowed to originate fully amortizing loans with a five year balloon. The rationale is that they hold these loans in their own portfolios and the government recognizes their need to hedge against inflation and rising interest rates. Yet, the Act does not recognize that private property owners who have 100% skin in the game need the same protection. Obviously, the Act does not recognize that a five year balloon is predatory lending. If there has to be a restriction it should at the very least be the same allowance given to community banks of a balloon in 5 years.
The loan has a fixed rate or is adjustable after 5 or more years, subject to reasonable annual and lifetime caps.
This restriction is reasonable, but it will eliminate the ability for any buyer to wrap an existing obligation that has an adjustable rate even if they believe they can afford any rate increase. This is again inconsistent with the SAFE Act.
Moreover, if the seller does not know about the ability-to-repay requirements and that they are not able to have a balloon, they certainly will not know that you have to have a fixed interest rate for the first five years.
The seller did not construct the home to which the financing is being applied.
There are a lot of small builders that have a spec house or two that they can’t sell unless they offer great terms using seller financing. Otherwise they have to let these properties go back to the bank, which does not help housing or the economy. There is also that group of unemployed construction workers who built their own homes when times were good and now need to sell. This takes away their ability to use seller financing.
Builders are in the business of building; not of originating loans.
Using a mortgage loan originator to facilitate a seller-financed transaction creates additional risk and expense for both the buyer and the seller. It has been said that a seller financing the sale of his or her own property would completely avoid the issue of licensing by retaining the services of a licensed loan originator. If a mortgage loan originator (MLO) fails to properly follow the ability-to-repay guidelines the buyer still has three years in which to rescind the sale which leaves the seller at risk and will most likely bankrupt them. Furthermore, there is no provision in a MLO’s errors and omission insurance that covers seller financing. None of the continuing education classes or the exams that an MLO must complete has a single chapter or question regarding seller financing.
Who is supposed to pay the MLO? MLOs can charge a flat fee or up to 3% of the transaction. The only advertisements I have seen so far advertise a flat nonrefundable fee of $450. This fee has to be paid in advance, which makes sense, because why would a MLO spend hours and hours on an installment sale transaction which might not close? If the buyer pays the fee, then this is a forced origination fee never before imposed on buyers seeking seller financing. Why should the buyer have to pay money just to have an offer presented to the seller?
A lot of buyers use seller financing because they are low income individuals, and seller financing, up to now, has provided a more affordable way to purchase property. If the seller pays the fee, they will have to pay money to have the MLO forward them the installment sale offer. If the seller receives multiple offers this could easily run into thousands of dollars in MLO fees just to sell their property.
A lot of sellers are also low income individuals. The MLO will have to be a part of every offer and counteroffer because the sale and terms of an installment sale are one and the same and cannot be separated. For instance, the buyer might be willing to pay a higher interest rate if the seller is willing to come down on the price and down payment.
A lot of seller financing takes place in rural areas that are underserved by mortgage lenders and banks. It is going to be very difficult to find a MLO in those areas who is also willing to take the risk facilitating a seller financed transaction.
This has the potential of pushing seller financing underground – not a desirable result.
The Dodd-Frank Act allows a property owner to use seller financing without having to become a mortgage loan originator as long as they don’t use it more than three times in a 12 month period and comply with the above restrictions. In the SAFE Act there are no restrictions to the number of times seller financing can be used as long as you are not in the business of being a mortgage loan originator. The coauthor of the Dodd-Frank Act, Representative Barney Frank, sent a letter to HUD on July 22, 2010 urging it to place the maximum amount of seller transactions that an individual could do before becoming a MLO, or having other restrictions on them, at five in a 12 month period. I would propose that the Dodd-Frank Act adopt that same number and place no restrictions on seller financing until 5 is surpassed. The only restrictions that should apply to 5 or less are those restrictions that the states already impose either through state statute or case law.
Under The Act loan officers at community banks do not have to become a Mortgage Loan Originator if they originate 5 or less transactions in a 12 month period. The rationale is that this is burdensome, costly and there is not enough volume to create a systemic risk. Ma and Pa on Main Street should be granted those same allowances. The Act puts more restrictions and risk on Ma and Pa than it does on financial institutions.
In watching the debates in Congress last summer it was repeatedly said that the Wall Street Reform and Consumer Financial Protection Act would not negatively affect or over-regulate Ma and Pa on Main Street. If this doesn’t negatively affect and regulate seniors, minorities, and lower income individuals on Main Street I don’t know what does. These restrictions will all but do away with seller financing, which will have a negative impact on housing, existing property owners, those desiring to be property owners and the economy.
The National Real Estate Investors Association is a National Trade Association representing more than 200 local real estate investor associations, and more than 30,000 real estate investors and small business owners. For more information about the National Real Estate Investors Association, visit http://www.nationalreia.com.
This legislation is not in the interest of real estate recovery and many people will not be able to buy houses which otherwise they will be able to.
Please do not pass this piece of legislation.
Thanks.
I do not agree w/ the proposal to Stop Owner Financing! By eliminating the ability to Buy & Sell through Owner Financing….you are taking away more of our Freedom. Owner Financing provides The Seller facing Foreclosure another Option to sell their property and preventing Foreclosure, The Seller who owes more than the value of the home has the ability to sell, The Buyer who cannot get a Bank Loan can Buy a House, The Buyer with less than perfect credit due to Life situations…Can become a Home Owner!! The hard working, Legal, Tax paying Individuals who are Experiencing the Hardships of Life cannot Always become Home Owners through Traditional Bank Financing! We are able to Transform Lives through Affordable Housing to Empower Families and Individuals to Enjoy the AMERICAN DREAM of Home Ownership! By passing this Law, you are taking away the Freedom of Home Ownership to many Americans! Many people we all Know, Family, Friends, & Co workers! Please take your Loved ones and other Americans in consideration when reviewing this Law!
Please do not bother seller financing the Dodd-Frank act.
There are many people that would not be able to ever become a homeowner
with out using seller financing and many seller would not be able to sell there
property.People need help today more than ever to become a homeowner with
this financing the way it is now .
Please do not vote for this Dodd-Frank Act .
Thank you,
I DECLARE YOU REMOVE THIS SINISTER ACT!! –
DODD FRANK ACT
Seller financed deals had nothing to do with the current lending crisis or financing melt-down and no rule is needed to control them !!
Seller “financing” provides housing for millions who otherwise could not qualify for conventional loans.
Homeowners , Investors and Homebuilders have every right to sell their home to whom they please.. Having them regulated like loan officers and bankers is ludicrous. Your greed or act is the equity you’re not receiving a $$$ on these home loans.
•Seller “financing” provides housing for millions who otherwise could not qualify for conventional loans.
•Homeowners are not bank officers or mortgage lenders. By requiring them (many if not most of whom who take back a mortgage are elderly) to qualify buyers using bank standards means they will simply refuse to sell with owner financing. Thus millions of people will be deprived of home ownership.
•Why should the buyer be required to divulge their income and assets to the very person with whom they are negotiating the terms of a sale? This is not required when there is a 3rd party lender.
•Requiring the buyer to turn over all their financial information to a stranger opens the door for identification theft and fraud.
•This also creates the opportunity for predatory borrowing. This is where an unscrupulous buyer knowledgeable about the Dodd-Frank Act leads an uninformed seller (and this will be the majority of sellers) into negotiations not in compliance with the ability-to-repay requirements. (An example of that could be a balloon, an interest rate greater than 1.49% above a standard mortgage, or the seller did not know how to calculate the income-to-debt ratio correctly, or know what residual income means). That buyer lives in the property trying to resell it for a profit and if they are not successful within three years they rescind the sale and get all their money back.
•By not allowing them to negotiate a balloon payment, there is a good chance that a seller 55 years or older will die before receiving all their equity. A lot of seniors have invested in real property with the intent of selling it using seller financing (an installment sale) in order to supplement their income in retirement, but also with the hope that they would not be stuck with a 30 year investment. The Dodd-Frank Act does the same thing insurance companies do who sell 30 year annuities to seniors. Our government has criticized this deplorable practice because seniors will die before they receive all their investment.
•The restriction of no balloon doesn’t affect just seniors, it has financial consequences for anyone using seller financing. Under the Dodd-Frank Act community banks are allowed to originate fully amortizing loans with a five year balloon. The rationale is that they hold these loans in their own portfolios and the government recognizes their need to hedge against inflation and rising interest rates. Yet, the Act does not recognize that private property owners who have 100% skin in the game need the same protection. A five year balloon is predatory lending. If there has to be a restriction it should at the very least be the same allowance given to community banks of a balloon in 5 years.
Why don’t our lawmakers get it?? It’s going to take “real estate investors” like us to bring the housing market, i.e. “the economy” out of recession! If they keep taking away our financing tools that help us to sell, what once was abandoned, boarded up, NON PROPERTY TAX producing eye sores, into beautiful remodeled homes for TAX PAYING BUYERS, who do they think will be buying these millions of forclosed and abandoned homes. It certainly won’t be average citizens because all of their credit is being screwed by the greedy banks through no fault of their own!! Can they not realize all of the industries that we investors create business / jobs for???
Lee T.
I understand consumer protection and I know why it makes sense. I want the government to be sure that the proper laws are in place to proescute those that engage in fraudulent and deceptive practices.
However, when the government decides to give large corporations a monopoly by making private financing illegal, it has gone to far. As a landlord, I too have a voice. I have not done a lot of owner financing but it is a tool that I keep handy for clients that believe can get over the hurdle and actually complete the transaction one day. Not every one is allowed this privilege.
This said, please rethink this proposition. It will further kill the market. We are the only ones buying today because the banks are making it virtually impossible to lend. Putting further restrictions in the market will have the unintended consequence of further dampening the market. Please rething the flawed plan.
Taking away a sellers right to owner finance is the last thing we need in this real estate market. This Dodd-Frank bill goes way over the top.
I did not find out about this until after the deadline but this is just another one of many of our rights and freedoms being usurped by those who should not be have any authority to do so.
This proposed legislation should not passed. Seller financing will help a lot of people to buy their own home. They will not be able to be approved with bank standards..and therefore, real estate economy in this country at this time will be more distressed.
Wake up people. Tell your friends, relatives and acquaintances about this.
thank you.
Unlike banks and mortgage lenders, both the buyer and seller are consumers. They should both be equally protected. The buyer is purchasing real property and the seller is investing in/creating a financial product where they receive their equity over time. The seller is relying on the buyer to make monthly payments and maintain and protect the property. Terms are not dictated to either party, but rather they are negotiated between the parties.
This is ridiculous legislation that helps no one… not the seller, not the buyer, and certainly not our already struggling economy!
I am a custom homebuilder, remodeler, rehabber, and real estate investor. I am past president of TREIA ( Triangle Real Estate Investors Association)and a member of Wake County Home Builders Association.
If we are limited on how we can buy and sell real estate, you are blocking millions of people from ever buying a home.
Since 2007 when this economy downturn started, most people do not qualify to borrow money from banks. This includes homebuilders and developers who had their notes called or simply not renewed by the original bank that loaned the money to build or develop. These banks repossessed the properties and sold them off at wholesale prices.
Those builders and developers can’t qualify for a bank loan. They had to go thru babkruptcy because their notes were not renewed. This is just one example of how restricting how people make deals work will effect this country for many years.
As a homebuilder and real estate investor, we should be able to sell our property to anyone with the negosiated terms we negotiate. The federal government cannot restrict how we do business.
A better idea is to make it mandatory for ALL Banks that take Any Federal Money must make loans at market rate to real estate investors so we can turn this economy around.
Do Not Restrict how real estate is bought and sold whether thru private investors or commercial banks.
I do NOT support the Dodd-Frank bill…………….charles.
This just another attempt to be in control of what you do with your own house. Let’s give them all our rights. They (Dems.) did the damage and frank and dodd was behind the scenes all along. This started in billy’s pres. , then in 2006 they took over and told Bush go get lost. Now they coming after us through regulation. Give them a few more years you have seen nothing yet. If we let them.
Here we go again with more regulation. Aren’t we already overwhelmed with regu-
lation? Why are these politicians trying to control more our lives with more of this
stuff? Enough is enough. This Dodd-Frank Act must definitely be stopped!
Thanks.
I owned several properties. One small home after the remodel couldn’t sell EXCEPT for seller financing. Even then with prefect credit got scammed by the mother who immediately put her son into the property. Ended up losing more than 50% of what I had in there. If I’d done this AFTER this law went into effect I’d been sent to prison. Why doesn’t the government stay out of of seller finance. They seem to want their fingers in EVERYTHING and I’m tired of it.
Everything is now REGULATED to the point I can’t tell if we’re living in America or Russia.
Dodd and Frank were part of the ORIGINAL problem with the housing crisis to begin with. Now they think they can FIX IT!!!! Couple of idiots that acted like it was someone elses fault.
Why do they want to regulate what goes on between two people that come to an agreement on price and terms. If one lies.. that’s their fault… just like the government.. they’ve been lying to us forever but that’s acceptable in their eyes.
enough is enough. the function of govt. is ensure every one has a chance why didn’t
they say to the banks and goldman you want the $$ modify the loans so that people can stay in there homes.by the people for the people. The only reason for this is for the banks to make $$$$ what happen to the restof us i want to sell my home to my neighbor and iam willing to hold the mortgage so be it who the heck is any bank or wall st. investment firm or even the fed to say what I can do witrh my home.Are you makeing the payments,When i was sick did you we give a grace period to catch up on the payments when I was out of work did you say come work for us so that you can make your payments. So why are we paying you to take my right to earn a living. it’s okay if they rape us But oh forbid we the people should do something for our selves. we the people,regardless of race, color . creed ,we the people who were born here ,who fought and are fighting,we the people who died and are.Dying we the people whom our govt. helped put out work, we the people who go to sleep in tents. we the people who were sold a heap of monure who up and found what retirement. what we should do let,s everybody take our $$$ out the bank let them eat all those charges. And all those who are in favour of this let’s put them out of work let them live on the street and see how they like it.None of this may ever happen-but we need to vote not for color of skin not because they smell like me look like me walk and talk like me. Or because they can throw the most mud. but because they are for the people by the people.
And all that other menure they shove tell em go stick it were the sun don.t shine.
with the crummy interest rates so low and the fact that I don’t trust this *F—–G* Government any further than I can through them, I keep all my cash in Postal Money Orders…..