Owner Financing Dodd Frank and the SAFE Act

Owner Financing Dodd Frank and the SAFE Act

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Owner Financing Dodd-Frank and the SAFE Act Owner Financing, Dodd Frank and the SAFE Act… If you are selling properties to owner occupants and doing selling financing, you ought to be aware of some comprehensive new regulations that have been in effect for a few years, and a real zinger that goes into effect on January 10, 2014. A few years ago, the “SAFE Act” was passed on the federal level, then was implemented on a state-by-state basis. The SAFE Act basically required that you be a mortgage loan originator, or use a mortgage loan originator to sell properties with owner financing. This means getting a loan application like a FNMA 1003, comply with Truth in Lending, and have the buyer sign the ½” thick pile of other lender disclosures. People panicked when the SAFE Act came out, and declared that seller financing was all but dead. I simply walked down the hall of my office building and asked a mortgage guy if he could “originate” my seller financing loans. He printed the stack of documents from his lender software and charged the buyer $400 as a loan origination fee. No big deal, just a waste of good trees in my opinion. The SAFE Act was later amended in my state (and many others) to allow you to do three or so deals a year without having to do all this nonsense. The Act did not address using different entities every three deals, so, as a practical matter, the issue was put to bed for us in Colorado.

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Publié le 25 novembre 2013
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Owner Financing Dodd-Frank
and the SAFE Act Owner Financing, Dodd Frank and the
SAFE Act… If you are selling properties to
owner occupants and doing selling
financing, you ought to be aware of some
comprehensive new regulations that have
been in effect for a few years, and a real
zinger that goes into effect on January
10, 2014. A few years ago, the “SAFE Act” was
passed on the federal level, then was
implemented on a state-by-state
basis. The SAFE Act basically required
that you be a mortgage loan originator,
or use a mortgage loan originator to sell
properties with owner financing.
This means getting a loan application like
a FNMA 1003, comply with Truth in
Lending, and have the buyer sign the ½”
thick pile of other lender disclosures. People panicked when the SAFE Act came
out, and declared that seller financing
was all but dead. I simply walked down
the hall of my office building and asked a
mortgage guy if he could “originate” my
seller financing loans.
He printed the stack of documents from
his lender software and charged the
buyer $400 as a loan origination fee. No
big deal, just a waste of good trees in my
opinion. The SAFE Act was later amended in my state
(and many others) to allow you to do three
or so deals a year without having to do all
this nonsense. The Act did not address
using different entities every three deals, so,
as a practical matter, the issue was put to
bed for us in Colorado. In other states,
however, there were NO exemptions,
meaning unless you were selling your own
principal residence, you had to be a
mortgage loan originator, or use one in the
transaction, even for one deal. Technically, you can’t even ADVERTISE
the seller-financing feature – the
mortgage loan originator has to do
so. But, again, as a practical matter I
don’t think the powers that be are
searching through craigslist or looking for
“owner will finance” signs on houses, and
the likely scenario is a “cases and desist”
letter from your state agency, giving you
a chance to get licensed. No fines, no
jail time. Enter two corrupt, knucklehead
politicians named Dodd and Frank. They
managed to pass the Dodd-Frank
regulations that go into effect January
10, 2014. This one is a bit more complex
and difficult to deal with, largely because
it is confusing and has regulations that
have yet to be clarified. We’ll start with who is exempt and who is
not. If you are selling raw land,
commercial property, or to a person who
is not going to a live in the property, you
have nothing to worry about. If you are a
person or a trust, you can do one deal a
year, so long as it’s not a “funky” loan,
like a reverse amortization, etc . I know, you’re thinking, “I’ll use different
land trusts for each property”, but that
may end up blowing up in your face if
you get caught. Admittedly, however,
nothing clearly in the Dodd-Frank
regulations address this. We certainly
are anticipating a “controlled group”
definition to come out soon. One federal
regulator commented that the rule was
25% common ownership, but nothing in
the regs back that up. If you are a corporate entity, then you
can do up to three deals a year, if the
deals meet the following three criteria:
There’s no balloon in the note (meaning
it must be fully-amortizing)
The interest rate is fixed for at least five
years, and
You “qualify” your buyer.