Correction on RESPA Law and Land Contracts - Posted by William Bronchick

Posted by William Bronchick on July 30, 2001 at 14:01:42:

In my “Cash Cow” and “Alternative Real Estate Financing” courses, I mentioned that doing a lot of owner-carry transactions may require compliance with RESPA (Real Estate Settlement Procedures Act).

After lengthy discussions with HUD, I am of the opinion that RESPA does not apply if the loan has a balloon or less than 2 years, with no promise to extend. I have always recommended a 2 year balloon on wraps for the purposes of control. Now there’s another good reason!

Below is an excerpt from emails with the HUD office in Washington:


I have to apologize, but my supervisor has told me I have given you incorrect information regarding “temporary financing.” She tells me the term of a mortgage does bear on whether it is “permanent” or “temporary”, and that temporary financing is defined as being financing that is for two years or less.

Sincerely,

William G. Christie
Consumer Compliance Specialist
RESPA/Interstate Land Sales Division

So, if I understand it correctly, any seller-carryback loan that is due in less than 2 years is not within RESPA, even if the seller does multiple owner carry transactions (ie, otherwise fits within the definition of a
"lender")?

William Bronchick, Esq.


Your understanding is correct. My apologies for the delay in responding.

I wanted to verify that I was giving you the correct response, and have done so with Acting Division Director, Ivy Jackson.

Sincerely,

William G. Christie
Consumer Compliance Specialist
RESPA/Interstate Land Sales Division