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Owner Financing Regs Tightening Friday, July 22, 2011, Last Day For Public Comment
Friday, July 22nd, 2011 @ 11:25 am | Banking/Finance, Business, Communications, Education, US Politics
The United States Congress is looking to tighten regulations on owner financing. THE DEADLINE TO COMMENT IS TODAY, FRIDAY, July 22, 2011, Congress will be making it difficult or impossible for property owners to collect their equity over time. This is certainly an investor issue; it is also a property rights issue, affecting all property owners. The freedom to sell on terms agreeable to a seller and buyer is a fundamental freedom affecting real estate value.
Today is the deadline for comments on this subject! You are encouragaed to voice your concerns over this issue of freedom being threatened to be taken away from all Americans. Go here to make and submit your comment.
While you are at it, consider forwarding this message to your neighbors and friends who own real estate. Let them know if these regulations take effect, their already decimated property values will go even lower. In these times getting a bank loan is extremely difficult. Owner financing has made it possible for people to purchase homes. Removing such an option will leave a void to be filled only by discounting for cash sales. Let’s rally! Show our elected officials we disagree with this position on regulating and eliminating owner financing! We, the People, did not cause the problem. The banksters have caused this moumental issue, and We, The People, as property owners and potential property owners have the right to help solve it. Let the banksters suffer the consequences of greed and poor decisions.
THE DEADLINE TO COMMENT IS TODAY, FRIDAY, July 22, 2011.
Use these ideas to make your point in your response as a member of the public:
- 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 likely be the majority of sellers) into negotiations not in compliance with the ability-to-repay requirements. An example of 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. The 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 sellers to negotiate a balloon payment, there is a good chance 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 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 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 private property owners who have 100% skin in the game who 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 who have a spec house or two they are unablre to 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 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.
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