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Attention my fellow investors!

The Department of Housing and Urban Development (HUD) is considering a change in the rules that would in turn make seller financing a thing of the past.

Yes, you heard me right!

HUD may take the option away for those not licensed as a loan originator under the Federal SAFE MORTGAGE LICENSING ACT. Seller financing can be limited to financing to a relative or your own personal residence ONLY. If you move out of your personal residence then try to offer seller financing you would not be able to. If you own an apartment building and you do not live in it you would be barred from offering seller financing. If you own more than one property you would not be able to offer seller financing.

We all know how important seller financing is in the real estate world let alone the investor side of it.

The banning of seller financing will affect:

  • Single Family Homes – The majority of seller financing is done in this real estate sector.
  • Buyers – options will be lessened. Some people do not qualify for a home loan. Some sellers believe in second chances and help families that have been turned down elsewhere for a conventional or government insured loan.  First time investors with no credit use seller financing all the time.
  • Sellers – options will be lessened. Sellers should retain the right to do what they please with their hard earned equity.
  • Multi Family Properties – Obtaining financing for a multi family dwelling is already difficult. Taking away the ability for a seller to offer financing will decrease the sales in this real estate sector.
  • Your negotiating options – Should seller financing be taken away you will have less negotiating power at the table. This will be one less wrench in your toolbox.

So what can we do you ask?

The time for us to voice our disagreement is short. We have until Friday the 5th of March 2010 to let HUD and  the decision makers; President Barack Obama and Vice President Joe Biden know that this is not the right choice. This right must be retained for home owners.  We need to save seller financing. The following are their contact information.

Let them know that seller financing is an integral part of our economic recovery. Limiting our options with this proposed rule change is not what congress intended.

To read the full rule change proposal click here

If you usually sit around on the sidelines this is not the time to do so. This will affect your industry more than it already has.

I welcome your comments and discussion on this topic.

Good luck in all you do America.

About Author

Winston Westbrook is broker & owner of Westbrook National Real Estate Company servicing the cities of Victorville, Spring Valley Lake, Adelanto, Hesperia, Apple Valley & the surrounding Victor Valley High Desert communities of So. California. Specializing in short sale and distressed properties.


  1. Hmmm, I wonder who’s behind this proposal — could it be the BANKING industry?? Take seller financing off the table and low and behold, who are we left with? Add to that either no credit or tight with stringent terms, like 35% + down. . . I can only see things clogging up more than they are — sad.

  2. Thank you for promoting this issue Winston. Seller financing eliminates the barriers required by traditional lending making it easier to sell properties in a tough market. Why the government would want to do anythigng to make it harder for property owers to sell properties in these times is beyond me. I think the government should promote seller financing to help reduce the glut of properties on the market and at the same time promoting home ownership by rewarding those companies that are offering seller financing as an option. In my business we work with real estate professionals that use seller financing in their day to day business. One solution that has been discussed is to work with a licensed mortgage professional and have them prepare and handle the paperwork for a small fee. Heck most mortgage brokers are just sitting around right now anyways!
    .-= Marc Faulkner´s last blog ..Home =-.

  3. How about placing the property in a land trust? One could then sell the trust and provide finacing to an individuls to purchase the trust??

    Does this seem to be a legitimate work around??

  4. James Blakeley on

    According to my research, that is not the intent of the new rules. As referenced here: “Accordingly, this proposed rule would provide in Sec. 3400.103(e)(4)
    that such individuals are not subject to State licensing requirements.”

    Found at

    Unless the seller is compensated in any way by a loan or mortgage provider, they are not expected to become licensed when selling their own property with seller financing.

    • Update – Wow did I miss this one, and it is costing me money.

      Texas has its own SAFE Act, and all seller financing stopped as of Sept 2009, unless handled by a licensed loan originator, attorney, or other exempt person.

      You can only use seller finance on owner occupied property, and only once every 36 months.

      The loophole as it stands is to pay a licensed originators to negotiate all financing packages, including seller financing, and or use an attorney to close regarding terms and negotiation of terms. (Contact your attorney for legal advice)

      Private funding just got harder…Mtg license not worth obtaining at this point. Just have to cut out more of my margin as cost of money.

      Urgent Update: House Passes Wall Street Reform Act HR 4173 Including Mortgage Reform Provisions of HR 1728 Regulating Owner Financing in Texas!

      No clue how this will be enforced, just know REI just got more expensive and more big government.

  5. I lease option from sellers (owners). They are deciding to lease option from me as a seller of their residence. They also know I am assigning my agreement for a fee.

    I have read the act, and do not want a Mortgage Origination License just for creating seller financing agreements to assign.

    If I had a mortgage origination license, I really would not want the liability of having some “government regulator” coming into my office and saying that I did not do my “underwriting” job prudently.

    Could any BPs member that has read the act, and I placed it on my site ( please tell me:

    Do you all think:
    The SAFE Act, passed as is drafted, will create liability for you as the REI if you create a seller financing agreement from a seller – residence owner, then assign it for a fee to a buyer?

    I’d REALLY like to know any opinions. It is really important to my business.

    Thanks very much,

    Brian, REISkills

  6. Chris Martin on

    From what I’ve read, I agree with James Blakeley’s comment. They are not trying (from what I can tell) to eliminate seller financing where the seller has a principal interest, they are trying to regulate unlicensed loan origination/brokering (broker has no principal interest and only gets a “fee” or other compensation.)

  7. This is insane!! The only reason that they can want to pass this is so the banks can make more money. With FHA financing making up so much of the market and ALL FHA LOANS being assumable at historic lows todays buyer will be in a great position when rates rise a few percent in years to come. A buyer can take the 1st mortgage and seller can finance a second behind it and EVERYONE wins but the bank!
    .-= Joe Feinhandler´s last blog ..San Diego 6 XETV talking about why this is a great time to buy San Diego real estate =-.

  8. Hello “Mr. Very Informative”. This article is dated February 2010. I haven’t heard any hemming and hawing about this matter – I mean in between all the squawking about tax cuts for the rich. What’s happening with this “proposed move”? Did enough irate and irritated people reach somebody who could do something about this and PUT AN END TO THIS RIDICULOUS BABBLING?!! Does anyone have an update?

  9. After searching and reading for a couple hours yesterday I turned up the information below. I am having my attorney verify it now. According to understanding the original language of the act was modified to include the exemptions discussed below.

    You DO NOT have to worry about the SAFE Act/licensing when you’re offering terms to someone when you are selling:
    Your primary residence
    A residential property to a family member
    A residential property to someone who will use it as a rental or vacation home
    Non-residential property
    According to HR 4173, you are allowed to owner finance up to 3 residential properties a year without worrying about licensing
    Also curious if the same legislation defines a maximum interest rate to owner occupied properties?

    One decent link that discusses it

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