Posted by Louie Dewey on February 15, 2010 at 10:06:44:
Thank you! Great answer.
Seller Financing Illegal - HUD - Posted by Dallas
Posted by Dallas on February 12, 2010 at 16:59:04:
Anyone read the proposed Safe Mortgage Licensing Act???
HUD Issues Problematic Rules Interpreting SAFE Mortgage Licensing ACT
HUD has proposed to eliminate ALL seller financing unless the seller
lives in the home or becomes a licensed mortgage originator.
Submit your comments regarding this nonsensical law.
- Logon to www.regulations.gov You will see two white boxes for
searching - On the left box labeled “Document Type”, pull the menu down and select
“proposed rules” - On the right box labeled “Enter keyword or ID”, enter “safe mortgage”.
Then, press search - Locate the blue search result “FR-5271-P-01 Safe Mortgage Licensing
Act: HUD Responsibilities Under …” To read the rules, click on this
title. You will be taken to another page. You will see “views”. You can
click on PDF file or another symbol which will show you the rule document
online. - On the right of the screen, click on “submit comment”
- Complete the form providing required information and your comments and
then submit
Re: Seller Financing Illegal - HUD - Posted by Dave T
Posted by Dave T on February 19, 2010 at 11:19:37:
The Safe Mortgage Licensing Act has already been passed. This proposed HUD regulation is not law, but simply how HUD is proposing to implement their responsibilities under the law.
CALL TO ACTION Redux - KILL (HUD) BILL Vol. 2 - Posted by David Butler
Posted by David Butler on February 13, 2010 at 14:07:03:
Much as it occurred at the time of the original Housing and Economic Recovery Act of 2008 that authorized the process of proposing the rules being discussed at this point in time, alert activists in the private cash flow and creative real estate investing industries are again trying to elicit the necessary support to override ill-advised legislation that is detrimental to the real estate marketplace - and more particularly, detrimental to those of us who participate in that marketplace as buyers, sellers, and/or investors.
As we said back at that time in both the Main Board, and in the Cash Flow Forum, seller-financing has long the back-bone of creative real estate investing. Two-hundred years long, for that matter. And it has been a critical lubricant in particular, during tight-money cycles. And contrary to popular conception, Seller-financing has a long history of being more consumer friendly (generally), and less predatory across the board, than institutional models. At least part of that is that private sellers - in general - are more generous in underwriting standards, rates, and terms.
Strangely, the rank-and-file of our industry was lukewarm to the original “Hue and Cry”. More oddly, only limited discussion came into the threads, and much of that showed a remarkable lack of understanding of the nuances and scope of seller-financing as an investment weapon?? The recent “easy-money” financing cycles of the past 18 years most likely played a significant role in the mindset that led to the complacency in objecting at that point in time.
Fortunately, we are getting a second bite at the apple now.
The premise being circulated with great alarm is quite valid, and of great concern to anyone remotely involved with real estate investing, if such investing includes, or is likely to include, seller-financing of single-family residential income properties (1-4 units). The issue in play here is one of clarity, and the existing limiting language that would unquestionably inhibit the broad use of seller financing; and subsequently severely limit the advantages that seller financing brings to the table for a wide range of parties, including sellers, buyers, investors (acting as sellers,buyers, or lenders), and the residential marketplace. This is particularly so during down markets, and tight-money cycles, such as those our economy is going through at present.
At this juncture, the opportunity is one of seeking clarification in the proposed rules, and attempting to assure that such clarification works to our advantage as nothing more than good business practice, which also fortuitously works to increase the free flow of commerce. Under paragraph F. (Individuals Not Subject to Licensing Requirements):
“The commercial context implied by the taking of an ``application’’ is also absent where
an individual seller provides financing to a buyer pursuant to the sale ‘of the seller’s own
residence’. The frequency with which a particular seller provides financing is so limited
that HUD’s view is that Congress did not intend to require such sellers to obtain loan
originator licenses. Accordingly, this rule would provide in Sec. 3400.103(e)(5) that
such individuals are not subject to State licensing requirements.”
The proposed rules needs to clarify the exception to embody the well-established rules of Installment Sales as they have existed in federal tax law for decades, and for the purposes intended. Consequently, our concern as an industry of CREI’s, is that the rule should adequately quantify the exception to include “ANY property owner providing private seller-financing to a buyer of the property subject to said financing.” For the purposes of achieving the intent of the SAFE Act, the language could easily define such sellers who would not be exempt. In that case, the above language can be extended to read “except those Sellers who are classified as dealers under existing IRS rules”.
To blithely ignore the opportunity to at least try to protect our own interests yet again defies any form of logic. And it leaves one defenseless in complaining about regulations we later deem suffocating, when we have voted for those same regulations through our silence at the time of their promulgation.
Seller-financing has been, and is again, a vital cog in the wheels of real estate commerce. Over and above our individual interests, the liquidity presented by such financing is more critical than ever to the American economy.
I urge every CREI, or aspiring CREI, to spend an hour this week-end to get more familiar with the issues in play, and then get onboard with the instructions for commenting before Monday through the vehicle provide as discussed in the several threads dealing with the matter:
Follow these simple steps:
- Logon to www.regulations.gov You will see two white boxes for searching
- On the left box labeled “Document Type”, pull the menu down and select “proposed rules”
- On the right box labeled “Enter keyword or ID”, enter “safe mortgage”. Then, press search
- Locate the blue search result “FR-5271-P-01 Safe Mortgage Licensing Act: HUD Responsibilities Under …” To read the rules, click on this title. You will be taken to another page. You will see “views”. You can click on PDF file or another symbol which will show you the rule document online.
- On the right of the screen, click on “submit comment”
- Complete the form providing required information and your comments and then submit
What do you say?
Say what you feel, but say it politely! The message should include that you would like the definitions in the proposed rules to be changed so that private individuals can originate and service loans on properties they personally own. Some ideas from others:
? bank loans are not available on some types of properties
? the tight lending climate has made bank financing “out of reach” for many
? seller financing is an “age old” tradition based on private property rights
? these rules would prohibit even partial seller financing - i.e. a “seller second”
? according to HUD’s “Residential Finance Survey” in 2001, roughly 40% of all non-farm residential properties in the US are owned free and clear
? an estimated 6 million Americans own a property other than their own primary residence
? an estimated 4.5% of Americans own three or more properties, many purchased solely as investment properties
? 40% of non-owner occupied residences are mobile homes which are more difficult to sell with bank financing
? approximately 5% of homes in US are for sale or for lease… seller financing may be key to liquidating this inventory
The continued success of our industry as we know it is threatened by these proposed regulatory changes. Please do not hesitate to follow the steps above and make your voice heard.
David P. Butler
Nascent Equity &
Hotspur Investment Group
Huh? - Posted by acw
Posted by acw on February 13, 2010 at 08:13:37:
Did you say that HUD is requiring a seller to be a licensed originator if Seller contributions are implemented?
This is not a requirement today…don’t know where you got this from…Please show us!
Re: Seller Financing Illegal - HUD - Posted by Dave T
Posted by Dave T on February 13, 2010 at 02:56:13:
The SAFE Act became law back in July 2008. HUD is simply writing a regulation to facilitate implementing their responsibilities under the law.
Asking HUD to include an exception to their regulation that is not specifically allowed by the law is just a futile exercise.
Re: Seller Financing Illegal - HUD - Posted by Lease Purchase
Posted by Lease Purchase on February 13, 2010 at 24:10:34:
Why do you call this a Nonsensical Law? Just curious. It actually make some sense to me.
Re: CALL TO ACTION Redux - KILL (HUD) BILL Vol. 2 - Posted by Anna K.
Posted by Anna K. on February 15, 2010 at 21:29:20:
Seller Financing fills the void that conventional lending doesn’t.
Re: CALL TO ACTION Redux - KILL (HUD) BILL Vol. 2 - Posted by Patricia Snider
Posted by Patricia Snider on February 15, 2010 at 08:36:00:
Let it be known I oppose this HUD bill. I believe in the Citizens rights to sell our properties on land contract or thru a mortgage. The choice is ours not HUD’S…
Re: CALL TO ACTION Redux - KILL (HUD) BILL Vol. 2 - Posted by Louie Dewey
Posted by Louie Dewey on February 14, 2010 at 19:28:07:
I do notsee where seller financing is at all restricted at least in the summary explanation of the legislation. In fact, it seems to be explicitly defended.
F. Individuals Not Subject to Licensing Requirements
Notwithstanding the broad definition of loan originator'' in the SAFE Act, as noted in HUD's Commentary, there are some limited contexts where offering or negotiating residential mortgage loan terms would not make an individual a loan originator. The provision in the definition that loan originators are individuals who take an application’’
implies a formality and commercial context that is wholly absent where
an individual offers or negotiates terms of a residential mortgage loan
with or on behalf of a member of his or her immediate family.
Accordingly, this proposed rule would provide in Sec. 3400.103(e)(4)
that such individuals are not subject to State licensing requirements.
The commercial context implied by the taking of an ``application’’
is also absent where an individual seller provides financing to a buyer
pursuant to the sale of the seller’s own residence. The frequency with
which a particular seller provides financing is so limited that HUD’s
view is that Congress did not intend to require such sellers to obtain
loan originator licenses. Accordingly, this rule would provide in Sec.
3400.103(e)(5) that such individuals are not subject to State licensing
requirements."
What am I missing?
louie
Re: CALL TO ACTION Redux - KILL (HUD) BILL Vol. 2 - Posted by Dominick Wallace
Posted by Dominick Wallace on February 14, 2010 at 18:50:55:
This will be bad for the industry and families we serve.
Re: CALL TO ACTION Redux - KILL (HUD) BILL Vol. 2 - Posted by David Butler
Posted by David Butler on February 14, 2010 at 22:46:26:
Hello Louie,
The operative clause is found in the middle of the text in Paragraph F, which you cited in your response here:
"The commercial context implied by the taking of an 'application’is also absent where an individual seller provides financing to a buyer pursuant to the sale of the seller’s own residence.
It is the last three words that is the limiting factor, or at best, presents nebulous language that would tend to indicate that an investor who sells off homes he held as rental property, would have to be licensed as a loan originator, in order to lawfully carry back financing on his own property.
As a result, this is the text of my comments to HUD posted earlier this weekend, requesting them to reconsider the language, and change the current import of Paragraph F, and related rules affected thereby:
To Whom It May Concern,
As a 33 year veteran of both real estate, and private note investing,
it is my considered opinion that HUD must override to the greatest
extent possible, the ill-advised SAFE legislation as it pertains to seller-
financing of single-family residential properties (1-4 units).
Seller-financing has been, and is again, a vital cog in the wheels of real
estate commerce. The liquidity presented by such financing is more
critical than ever to the American economy. The proposed rules need
to clarify the exception to embody the well-established rules of
Installment Sales as they have existed in federal tax law for decades
and for the public policy purposes embodied by these rules - which
includes ever present objective of injecting liquidity into the marketplace,
and encouraging the free flow of commerce.
This is particularly so in that Installment Sales have long been an integral
tool of real estate investing, for the purposes of maximizing flexibility and
valuation objectives, and tax and estate planning.
Consequently, paragraph F. (Individuals Not Subject to Licensing
Requirements), should adequately quantify the exception, such as I
have introduced here:
“The commercial context implied by the taking of an ``application’’ is also
absent where ‘ANY property owner provides private seller-financing to a
buyer of the property subject to said financing, except those Sellers who
are classified as dealers under existing IRS rules’”
We strongly urge HUD to change the proposed rules so that property owners
(excepting dealers) of ANY single-family residential properties (1-4 units) can
originate and service loans on properties they personally own.
Thank you for your consideration in this matter.
David P. Butler
Re: CALL TO ACTION Redux - KILL (HUD) BILL Vol. 2 - Posted by Dallas
Posted by Dallas on February 14, 2010 at 21:16:06:
The key phrase is “the seller’s own residence”
Read it carefully again. Where does a subject to deal fall?