Dodd-Frank / SAFE Act regarding MH investing

Investor · MN · Member since 2014 · 137 posts · 19 votes

Hello BP!!

During some research I have came across Dodd-Frank and SAFE act regulations with seller financing. As a new investor should I meet with a RMLO and/or Real Estate Attorney:

Before I start making offers?

After I make a deal?

Could someone point me in the direction on understanding laws of the Dodd-Frank and SAFE act with regards with MH.

Any help with be appreciated,

Walter

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Brian Gibbons

Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes

12y

@john

@John Fedro undefined

thanks for that reply.

Here is a folder for those interested in Seller Financing and Dodd Frank, CFPB. ATR Rule, SAFE Act, TILA and RESPA, along with SFRs, Mobile Homes, Multis, etc.

http://bundlr.com/b/dodd-frank-safe-act-respa-tila

Not for the impatient or "fast food" answer population. Many attorney's interpretations here.

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Jim JohnsonPro Member
Rental Property Investor · Denver, CO · Member since 2008 · 355 posts · 324 votes
12y
Walter,
If you are going to self fund the deals and write the financing paper yourself, you will need to be a registered lender to even offer lending services. Once you have that- compliance comes with just following the lending guidelines. The lending education will inform you what needs to be done to comply with the Safe Act and the lending guidelines and requirements for offering financing to home buyers.
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Walter Pape
OP
Investor · MN · Member since 2014 · 137 posts · 19 votes
12y
@Jim Johnson would I have to do this if I plan on using payments with a move in / down payment fee. Similar to what @John Fedro discussed in his podcast?

Are you a licensed registered lender ? If not how do you sell your MH ?
1 Reply
John FedroPro Member
Investor · Austin, TX · Member since 2009 · 413 posts · 295 votes
12y
Hi Walter,

Very important question and topic you bring up. To answer the question the way you asked it above "Yes", you should meet with local RMLOs and a real estate closing attorney to review their advice locally for your business. In fact I would reach out to multiple professionals to get their advice for you with regards to selling with seller financing.

The Dodd Frank Act and Safe Acts do impact us when selling mobile homes in parks and on private land. It is vitally important to your future success and legal practices that you do understand what is legal and what is against the new laws when selling while extending credit to end-users. The researched methods I use to purchase and resell mobile homes are not well known nor are they advertised anywhere on this site.

With all that said learn as much as you can about these acts and how to avoid breaking the laws. Once you have a good grasp on this and moving forward take action to start helping sellers and buyers.

There are also many other threads here on the BP forum that discuss the topic.

Hope this reply helps and makes sense. I know this answer is slightly vague however to answer your question, more correct education is always better than less education.

Talk soon,

John Fedro
Podcast Guest on Show #75
1 Reply
Brian Gibbons
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
12y
@john
@John Fedro undefined
thanks for that reply.
Here is a folder for those interested in Seller Financing and Dodd Frank, CFPB. ATR Rule, SAFE Act, TILA and RESPA, along with SFRs, Mobile Homes, Multis, etc.
http://bundlr.com/b/dodd-frank-safe-act-respa-tila
Not for the impatient or "fast food" answer population. Many attorney's interpretations here.
2 Reply
Jim JohnsonPro Member
Rental Property Investor · Denver, CO · Member since 2008 · 355 posts · 324 votes
12y
I use a leas option very similar to the way cars are done. We truly lease a home for several years- could be 3-5 years, then the renter can choose a buyout on the home. If they have made stellar payments, we would finance the final purchase. At that point, we would use a promissory note that was not tied to the home, just a personal note and no security agreement. The home would also be transferred into the name of the new buyer and no lien would be placed on the home.
Now my situation is not the same as most, where I own the mobile home parks I am selling homes in- so my risk is not anywhere near the same as someone financing homes in a strangers park. I also do not give away the home at the end of the lease- the home has value and we ask a fair price for the home. I would say our buyout price is right in line with what a home from a tenant would sell for if they sold it individually to a buyer for cash.
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Walter Pape
OP
Investor · MN · Member since 2014 · 137 posts · 19 votes
12y
@John Fedro are you a licensed loan originator or self fund the sells? If not how do you sell your MH investments (within parks) with payments?
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John FedroPro Member
Investor · Austin, TX · Member since 2009 · 413 posts · 295 votes
12y
Hi Walter,
Both great questions. No, I am not a licensed loan originator, nor do I originate or negotiate loans that violate these acts.

Concerning mobile homes attached to real property I do use a RMLO and property attorney to negotiate and create all paperwork. I know you asked about mobile homes in parks however I wanted to cover both. Concerning mobile homes in parks I use a combination of lease agreements, addendums, disclaimers, personal property trusts and unsecured notes. With that said there is a good deal of paperwork and screening that goes on behind the scenes that must be documented. I know this is a very short and vague answer to your question however without going into great detail I do hope it helps. I still advise you to seek as much "professional" assistance as you can as there may be alternative strategies to sell and not violate these acts.
Great feedback Brian and Jim.
If you require more info please email me personally.
Talk soon,
John Fedro
Podcast Guest on Show #75
2 Reply
Walter Pape
OP
Investor · MN · Member since 2014 · 137 posts · 19 votes
12y
@John Fedro ,
Thank you for your thoughtful response. As usual it is very informative and helpful.
Walter
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Yusuf Mathai
Investor · portland, OR · Member since 2014 · 15 posts · 3 votes
12y
@John Fedro, thanks for all the insight. I am learning fast about MH since your podcast aired. I to had similar questions with regards to financing on these, but others had already asked the question, and thanks for the answers. Also since your podcast I was able to negotiate with a seller for a 2/1 MH for $750. At that price I can afford to hold it for a couple of months while i learn about all the behind the scenes paper work required to finance the MH.
Again thanks
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John FedroPro Member
Investor · Austin, TX · Member since 2009 · 413 posts · 295 votes
12y
Hi Yusuf,
Congratulations! That is excellent to hear. Well done at taking action and securing that 2/1 for only $750. I hope the home looks pretty and will be a fast resell. Private message me if you have any specific questions.
All the best and talk soon.
John Fedro
Podcast Guest on Show #75
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Marc Faulkner
Investor · Kalamazoo, MI · Member since 2009 · 1k+ posts · 495 votes
12y
I have not seen any investors willing to buy notes or contracts that are not written in compliance with the current laws, in any quantity. Also-I am not sure how most Lease Option Agreements (even when wrapped up into a trust) will not be seen as an extension of credit, creating an ownership interest, by most courts or others enforcing the laws. It's a slope I have been to scared to ski for a few years now.
I like to buy them under contract, give the seller a $200 deposit then flip the home to a professional buyer and turn my $200 into $2000 -$5000 immediate cash profit!
2 Reply
Omar C.
Chicago, IL · Member since 2014 · 91 posts · 32 votes
12y
Hi Everyone,
Is it legal to sell a home without interest and be compliance with Dood-Frank/Safe act. If I sell a home for $10,000 and don't charge any interest just straight payments for x months would that be legal? I would rather just build in my interest and profit into the price and sell it without all the hassles.
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Account Closed
Investor · Waynesville, NC · Member since 2014 · 408 posts · 121 votes
12y
Good question @Omar C.
Does anyone know the answer? I have a mobile home I would like to sell but am scared to even try because of these laws.
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Jim JohnsonPro Member
Rental Property Investor · Denver, CO · Member since 2008 · 355 posts · 324 votes
12y
Originally posted by @Omar C.:

Hi Everyone,
Is it legal to sell a home without interest and be compliance with Dood-Frank/Safe act. If I sell a home for $10,000 and don't charge any interest just straight payments for x months would that be legal? I would rather just build in my interest and profit into the price and sell it without all the hassles.
So- the safe act has lots of parts but one is 'a security interest' in the home. Interest is one part, but a lot of this is adjoining someone borrowing with the asset. So- yes you would be in violation IF you create a security interest.
Second point- If you take payments until the home is paid off the IRS will call this a disguised loan, and you will have to use the IRS rules to set a internal interest rate that you need to account for on your taxes. This is a BIG IRS no - no. It is legal, but it must be accounted for.
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Omar C.
Chicago, IL · Member since 2014 · 91 posts · 32 votes
12y
Jim, do you know of any Mortgage Loan Originators in Indiana? Called around and left a bunch of voicemails and never received a call back.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Jim Johnson
its called imputed interest when you sell on contract with no interest.. I have done it many many times to sell my OREO... its no big red flag.
MH fall under the safe act so one needs to just check with the state where the property is located and then worse case scenario find a MLO to run the paper work for you and make sure its a qaualifited mortgage ( just a term)
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Jim Johnson
the issue if its like Oregon is that MLO's have to work for a principal broker.. and the risk reward is just not there.
this is going to create a bizz opp for the first company that steps up and does just owner finance deals for third parties.
MLO's make 2 to who knows how much per file.. 5 to 6 is probably average ( of course I am on the west coast were our loans average 300k .. but you get the drift.
HOw much are you willing to pay for someone to do the paper work for you and keep you compliant.. 250 500.. well as a NMLS licensed mortgage banker which I am I would never take on this risk or liability for that small amount of money..
but if I was doing 100 to 500 a month in a boiler room gin mill type of setting I would consider it.. I am sure someone will step up and go nationwide for this service and sell it like a commodity make enough to make the down side worth it..
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@John Fedro
John I just did my CE for my NMLS license and one module was MH in park or out. and it was very clear they fall under Safe act and dodd frank.. But an extension of credit no matter how you couch it could be construed as a loan..
the reality is from my perspective and I have owned multiple HM parks.. the risk is not very great but you may not be 100% compliant either with your process if taken to the mat
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Jim JohnsonPro Member
Rental Property Investor · Denver, CO · Member since 2008 · 355 posts · 324 votes
12y
Originally posted by @Omar C.:

Jim, do you know of any Mortgage Loan Originators in Indiana? Called around and left a bunch of voicemails and never received a call back.
Omar, I do not. We lease our homes in Indiana, and then if the tenant wants to buy the home at the end of the lease term they must do so with cash.
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Jim JohnsonPro Member
Rental Property Investor · Denver, CO · Member since 2008 · 355 posts · 324 votes
12y
Originally posted by @Jay Hinrichs:

@Jim Johnson
its called imputed interest when you sell on contract with no interest.. I have done it many many times to sell my OREO... its no big red flag.
MH fall under the safe act so one needs to just check with the state where the property is located and then worse case scenario find a MLO to run the paper work for you and make sure its a qaualifited mortgage ( just a term)
Jay, I am not saying the act of doing this is a red flag- the red flag is if you sell this way and do not account for it on your books and in your tax returns.
1 Reply
Omar C.
Chicago, IL · Member since 2014 · 91 posts · 32 votes
12y
Hi Jim,
Can you share with me how to properly lease a mobile home in Indiana. I'm struggling with how to get out from these homes and be compliant with SAFE/IRS and any other regulations.
Thanks,
Omar
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John FedroPro Member
Investor · Austin, TX · Member since 2009 · 413 posts · 295 votes
12y
Hi Jay,
Congratulations on the new license! You will be a great deal of wealth around here as usual.
I appreciate your wisdom around here and do 100% agree with you that mobile homes do apply under all these acts as they are a type of dwelling. In addition extending any credit to your end-user buyers as outlined in these acts is a violation of said new laws.
Thanks for the shout out.
All the best,
John Fedro
Podcast Guest on Show #75
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Jim Johnson
Agreed with your point.. if your carry a zero interest carry back you must use imputed interest and report it as a gain.. right now that's pretty small rate... My accountant handles that stuff but we have been doing 0% loans for many years my dad did them on land sales contracts in the early 80's when interest rates were 18% and up.. Guess how much land we sold ( a bunch)
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@John Fedro
John not new license just happened to go through the 10 hour annual CE last week so the part of MH was fresh in my mind.. as there was some discussion about it in class
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Jim JohnsonPro Member
Rental Property Investor · Denver, CO · Member since 2008 · 355 posts · 324 votes
12y
Originally posted by @Omar C.:

Hi Jim,
Can you share with me how to properly lease a mobile home in Indiana. I'm struggling with how to get out from these homes and be compliant with SAFE/IRS and any other regulations.
Thanks,
Omar
Omar-
sending you a pm.
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