Posted by BigV on May 31, 2009 at 13:29:26:
Kristine, I recall listening to Bronchick’s land trust tapes, apparently, there is already a very gray area for owner financing up to $1MM/year. Say, you finance 5 properties at 200K each, you are already required to comply with the same laws a banks.
I may be wrong on this, but I remember hearing (or something similar) on some of his land trust tapes.
URGENT - HR 1728 Ban on Seller Financing! - Posted by David Butler
Posted by David Butler on May 28, 2009 at 16:00:31:
HR 1728: The Taking of Private Property Rights
This is an important message from Ric Thom, President Security Escrow Corporation, Albuquerque, New Mexico; and Eddie Speed, at Colonial Funding Group.
Even though the proposed legislation offers some significant market advantages to National Equity Solution, it is hugely detrimental to the overall real estate marketplace, and will create severe financial damage to the American economy. Please read, and react NOW.
May 26, 2009
HR 1728: The Taking of Private Property Rights
Congress is trying to greatly restrict seller financing. This is a taking of our private property rights. The US House recently passed HR 1728 which limits you as an individual to sell real property using seller financing to only once every 36 months (HR 1728 Sec 101 Definition (3)(E)).
This bill was written to amend the Truth-In-Lending Act to regulate residential mortgage loan originators. This stems from the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, or S.A.F.E, which established a national registry and standards for mortgage brokers. This is all directed at mortgage brokers, mortgage companies and banks. These are third parties that provide loan proceeds to the buyer to purchase property. Thatâ??s a good thing, but for some reason Congress has included private property owners who wish to sell their property using seller financing.
Seller financing is where the buyer and seller negotiate a price, a payment plan, and interest rate. Itâ??s an installment sale where the buyer pays the seller monthly and the buyer gets the use of the property. This is a frequently used method of buying and selling real estate especially in this economy of tight money.
Banks are just not lending on, or are requiring huge amounts of cash down on, certain types of properties. Seller financing is used tens of thousands of times every year, if not hundreds of thousands of times, to sell real estate. In New Mexico alone, with a population of fewer than 2,000,000, it is used over 5,000 times a year.
These acts are over-reaching and will have unintended consequences. The definition of a residential mortgage loan according to the Housing and Economic Recovery Act of 2008 means any loan primarily for personal, family or household use that is secured by a mortgage, deed of trust or other equivalent consensual security interest on a dwelling or on residential real estate upon which is constructed or is intended to be constructed a dwelling (Sec 1503 Definition (8)). This means any vacant land would fall under this act. A dwelling can be a house, condo, or mobile home.
Here are just a few examples of the consequences:
â?¢ Letâ??s say you are about to lose your home and you need another $1000 a month to make ends meet. You decide to sell your five acres in the mountains and your 1982 single-wide mobile home on one acre by the lake to make your mortgage payment. Banks are not lending on these types of properties and you need a quick sale, so you use seller financing. The problem is you need to sell both to get an extra $1000 per month, but the government has prohibited you from doing so because of the one every 36 month rule.
â?¢ Suppose you have a self-directed IRA. Every year you buy property with cash out of the IRA. You then sell it using seller financing so you can get a 6% interest rate. You will be prohibited from doing so under the Act.
â?¢ Letâ??s say you have four rental houses that you own free and clear. Part of your retirement plan was to sell them using seller financing with a 6 to 7% interest rate and a 30 year amortization providing a nice, monthly income. You donâ??t want cash because CDs only pay 2% and you already lost money in the stock market. But, under this act you are prohibited from selling them now. You can only sell one every 36 months.
These scenarios go on and on. They are as unique as the individuals and the properties. Real estate is not just a house in a California suburb. It is also vacant land, non-conforming housing, land and mobile home, duplexes, triplexes, farms and ranches, and recreational properties. These types of properties would fall under the Act.
Not everyone invests in the stock market. A lot of people invest in the above types of real estate. Not everyone wants to cash out when they sell their property; some people like seller financing for the income stream. Most states have escrow companies that hold the deeds or releases for buyers and sellers. They also keep track of the principal and interest and report interest to the IRS.
This bill takes away our right to use seller financing as we see fit. House Bill HR 1728 should exempt anyone who offers or negotiates terms of a real property sale financed in whole or in part by the seller and secured by the sellerâ??s real property.
Why should individuals who had nothing to do with this crises be punished for the sins of the greedy Wall-Streeters? These acts are for mortgage machines, not Ma and Pa. I know the government is concerned about predatory practices, but is seems the local district attorney would be a more effective hammer than to regulate, restrict, and police every real property owner in America.
Besides, seller financing is not lending. It is an installment sale. The seller has agreed to receive their equity over time, plus a negotiated interest rate.
House Bill HR 1728 is headed for the US Senate. Please write your senator and have them exclude seller financing from these acts that are supposed to regulate the previously unlicensed mortgage brokers.
Write your stateâ??s Realtor Association and the National Association of Realtors and ask them to help stop the government from taking away our right to sell our property the way we want to and when we want to. There should not be any restriction on how many properties we sell during a certain time period.
Whatâ??s next - just one transaction every 5 years, or no seller financing at all? This restriction is the last thing America needs in this great real estate compression. Please act now. Exempt Seller Financing From HR 1728. Please forward this to anyone you think should know about this issue.
To locate your Senator go to U.S. Senate: Senators
To locate your stateâ??s Realtor Association go to: http://www.realtor.org/leadrshp.nsf/webassoc?OpenView
Saving Our Economy… One Property At A Time!
David P. Butler
National Equity Solution
Real Estate Consultants & Investment Company
Re: URGENT - HR 1728 Ban on Seller Financing! - Posted by Joe Register
Posted by Joe Register on May 14, 2010 at 12:41:24:
It took a person several steps below an idiot to even consider a law like
this in good times, or bad times. It would be nice to let the public know
which lawbreakers vote for this law!
there is no (HR 1728 Sec 101 Definition (3)(E)) - Posted by Marc Donovan
Posted by Marc Donovan on June 10, 2009 at 06:41:34:
section 101 says:
Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is amended by adding at the end the following new subsection:
but there is no definition 3-e, so what are you talking about?
Can you tell us which page/line in here describes “using seller financing to only once every 36 months”
http://www.house.gov/apps/list/press/financialsvcs_dem/1728.pdf
I read the whole thing and I didn’t see that anywhere in there. I did see a 90 day notice to tenants. Is that what you mean?
Has anyone else read this bill? - Posted by Kristine-CA
Posted by Kristine-CA on May 29, 2009 at 17:45:51:
HR 1728 really does have language regarding private individuals selling
via carry back only once every three years. It really is on it’s way to the
senate. That is so restrictive as to seem insane. Does anybody know if
any of the amendments are addressing this issue?
Hmmmmm, what’s the problem? - Posted by WAREIA
Posted by WAREIA on May 28, 2009 at 21:01:03:
Well, some of you know me. I don’t see what the problem is. I think this is wonderful legislation. Seller Assisted Type Financing should be banned, eliminated and made illegal, including and not limited to…
You should either Rent or Buy, but not Rent-to-Buy. Since according to what I read, only 14% ever exercise their option or qualify to purchase in their own name, the other 86% are getting screwwwed, all in the name of “Creative” Real Estate. And some of you “Investors” call this a Win-Win? For who?
Sure, for you, the one who keeps an non-refundable deposit and then collects another deposit on the same property for another unsuspecting sole. Geez, even the self-proclaimed Gurus teach you that you may put two to three different folks in the place and collect new deposits for your pocket. Personally I think that is at least unethical if not fraud.
Hey, in fact 36 State Assistant Attorney Generals agree with me, thus the legislation being introduced.
“The Fed”, through it’s Think Tank, is researching a more positive alternative to Seller Assisted Type Financing right now. You don’t think they would pass legislation to eliminate Seller Financing without offering an alternative do you?
What Gurus and Investors are worried about, and let’s be honest here, is that they won’t be able to sell there books, tapes and seminars anymore. 90% of the profits in “Creative” Real Estate are made by Gurus selling info, not by Investors buying and selling properties.
The same thing happened in 1849. The ones who got rich where the ones seller horses and shovels, not the ones digging for gold. San Fransisco was built on the profits made by selling supplies to prospectors. And the Creative Real Estate Business is no different.
Oh sure, every once in a while someone finds a nugget and that’s what keeps the other coming to seminars to buy shovels and incredibly inflated prices. As if one Gurus shovels can dig deeper and faster than any others.
The most successful “Gurus” or Mentors are the ones you never hear or read about. They are the ones who are in the trenches doing deals themselves. They mentor by holding one person’s hand at a time and making them successful and then another and another and another. They share and split profits from real deals not ever talked about in seminars and webinars.
It is raining - Posted by The Weatherman
Posted by The Weatherman on May 28, 2009 at 17:02:50:
It is raining where I live right now.
Do you think that Congress would do something about this?
I had plans and this rain is a major inconvenience to me at the moment. It is imperative that Gov’t intervene immediately. Might this be HR 9999?
We have Gov’t so far up our backside we will never be right again. Sadly sitting in the rain at the moment, and I am not sure if those are rain drops or tears on my face.
Re: URGENT - HR 1728 Ban on Seller Financing! - Posted by Keith
Posted by Keith on July 13, 2010 at 17:14:36:
HR 1728 got put in with HR 4173 mentions Residential Mortgage Loan on dwelling or Loan on dwelling with Residential Real Property. Making Vacant Land owner financing Exempt? But not if you read HR 4173 Sec 1073 & Sec 1074
Re: there is no HR 1728 Sec 101 Definition (3)(E) - Posted by Dave T
Posted by Dave T on June 10, 2009 at 13:02:15:
A bill may go through are several changes between introduction and passage by the House. The bill that was introduced in the House is the version you are reading. This version was amended a few times before the House passed it and referred the bill to the Senate. You need to look at the final version that was referred to the Senate.
Re: Has anyone else read this bill? - Posted by Ken-Orlando
Posted by Ken-Orlando on May 29, 2009 at 21:43:36:
I have read the bill as well as a memo from the NAR responding to a call to action regarding this house bill.
The memo stated that they don’t believe that the bill will be taken up by the Senate anytime soon based on comments made by Senator Chris Dodd in the May 26th release of Inside Regulatory Strategies.
Based on this memo the NAR is not on board removing the proposed owner financing limitation of no more than 1 property every 3 years and believes we should just comply with the law if passed and become licensed as a mortgage originators and become subject to the rules within H.R. 1728.
A direct quote from the memo “It is Congress’s contention that this requirement would severely constrain the possibility of seller-financing as a loop hole for the unscrupulous businesses that preyed on consumers during the housing bubble.”
Re: Hmmmmm, what’s the problem? - Posted by Eric in FL
Posted by Eric in FL on June 02, 2009 at 15:50:43:
Wow,
I kept saying don’t do it but I have to now. This is someone whom clearly does not understand what they are talking about or a very skilled marketer creating controversy to drive interest. I believe they actually may be both. You are clearly someone who does not understand real estate and contract law and are either jealous or not bright enough to get out of the rain. Not everyone who sells on a land contract is out to “screw” people. And guess what a wrap does? It allows someone to keep financing in place that maybe an institution or individual holds the note. They still get their monthly payment and everyone is happy.
I think you need a hug.
Best Regards,
Eric
Re: Hmmmmm, what’s the problem? - Posted by Alexander (FL)
Posted by Alexander (FL) on May 31, 2009 at 17:20:53:
I agree with some of your points.
Speaking of “unethical” and “fraud”…if it wern’t for the actions of the “subprime” lenders, the economy would not be in the condition it is today.
This legislation is clearly aimed at protecting the interests of banks and has little or nothing to do with protecting the interest of the public.
Re: Hmmmmm, what’s the problem?-YOU - Posted by Jack-E
Posted by Jack-E on May 31, 2009 at 16:30:06:
WAREIA, who is this nut? Washington Real Estate Investor Association? Surely not. The problem is someone who is trying to purport to be a R.E association, and give advice not to do most of the things the average experienced R.E. investor does every day. He is really out of it. On what basis do you give such advice and why do you think you represent an entire REIA?
Re: Hmmmmm, what’s the problem? - Posted by Kristine-CA
Posted by Kristine-CA on May 29, 2009 at 16:33:51:
I’m confused how you could lump all seller financing together. Lease
options are problematic and I understand how easy it is for legislators
to think they are serving the people by banning this that and the other
thing when it comes to rent to own and installment sales. But a
straight-forward sale with down payment and decent interest rate
seller carry back? Do we really want to interfer with that?
I just closed one of those today. No gimmicks. 25% down, 8% interest.
The buyer is now the deeded owner and I’m now the note holder…just
like Wells Fargo or any other lender.
There is some murkiness in the business of lease options and contract
for deeds, no doubt about it. When the intent is to set someone up for
failure, or make it likely that they will fail, the intent is the same as
predatory lending. That certainly doesn’t include all LO and CFD deals.
Wraps and subject to deals are true problem solving so I don’t see how
you can lump everything together.
Lord help us if seller financing really gets limited.
how will it be enforced? - Posted by BigV
Posted by BigV on June 01, 2009 at 19:03:36:
For example, what if I hold each home in the LLC, and LLC is the owner? Then keep opening LLC’s for each owner financed home, no?
Re: Has anyone else read this bill? - Posted by -Steve-
Posted by -Steve- on May 31, 2009 at 20:37:45:
…welcome to the change
He’s an egotistical wannabe - Posted by Hesa Wannabe
Posted by Hesa Wannabe on May 31, 2009 at 17:19:30:
WAREIA runs some kind of REIA in Utah and thinks that and a little phone consulting make him a guru. But now I guess he is better than them all and his strategies are the only ones worth while. Ignore this idiot. Big hat no cattle.
Re: Hmmmmm, what’s the problem? - Posted by WAREIA
Posted by WAREIA on May 30, 2009 at 10:58:23:
I see you point if YOU are the Note Holder. That means that there is NO conventional underlying financing. I carry notes myself on properties that I’ve acquired for cash and have no traditional financing.
Properties with Owner Occ financing should not be allowed to be rented or sold via seller financing. Or, they would need to be converted to Non-Owner Loans prior to renting. But no property owner with conventional financing should be allowed to create a Seller Financing arrangement unless he/she owns the property free and clear.
Re: how will it be enforced? - Posted by Ken-Orlando
Posted by Ken-Orlando on June 01, 2009 at 20:38:56:
That sounds like a possible solution. But do you really want to do it? Say you sell 1 house a month with owner financing, so you would need to create 12 LLC’s a year. Over 3 years you will have 36 LLC’s for which you will need to have board meetings, file tax returns, etc.
good point - Posted by Potash
Posted by Potash on June 01, 2009 at 19:35:33:
I know this isn’t the point you were making but…the few unscrupulous people that the Bill is intended to punish will just ignore it. There is no practical way that such a restriction can be enforced, the workarounds are just too easy. The restriction will only be effective unto honest people and the outlaws will have the market to themselves. If Seller financing is outlawed then only outlaws will offer seller financing.
Additionally, I think this a States rights issue pursuant to the 10th Amendment and that the Bill would not stand a legal challenge.