I have purchased a mobile home in a Texas mobile home park (DFW area). Rehab is complete and I have a buyer for an Owner Finance sale. I have used an RMLO and Title Company for my non-Mobile home single family Owner Finance sales. Do I need to do the same for MHs, or can I do it myself? If the latter, can anyone share what documents/forms they use for the Purchase agreement, Note, Security etc...?
Almost any closed end loan, secured by a dwelling is covered by Dodd-Frank & the Safe Act. Therefore, you would be better served to enlist the services of a qualified and approved RMLO. There are some ways around the Acts, by not directly listing the dwelling as the collateral on the loan, but you already have a relationship with an RMLO.
My understanding is that all of us are allowed to sell one residential dwelling per year without becoming an RMLO. If this is your only deal this year, then I think you are fine.
Also, it is not clear that rent-to-own agreements are regulated by Dodd-Frank & the SAFE Act. This matter has never been tried in court. It may be regulated, it may not. RTO agreements are options, not obligations. And HR1779 (making it's way through congress) would amend Dodd/SAFE and clarify that they are not.
But we just don't know. So if you RTO the home, rather than 'selling' it and carrying-back a mortgage, then you may well also be exempt from the needless regulations. We actually do Rent Credit rather than RTO. RC is like RTO-ing, but the resident can cash-in their credits on any mobile home we have for sale. The credits program is like the greenstamp programs grocery stores used to offer. RC paperwork does not attach to any asset at all, and, thus, is even farther away from being considered a 'mortgage.'
You are correct, RTO has not been challenged in court, with regard to it's applicability to Dodd-Frank &/or the Safe Act. However, if the RTO is done with a down payment or option fee as a close ended agreement - meaning the homeowner has to execute the purchase by a certain date or forfeit the upfront money - then it should be assumed to be covered by the regulations of Dodd-Frank &/or the Safe Act. However, you can structure the deal as a standard lease with a Right of First Refusal, which the tenant has purchased. In the case of a right of first refusal, you are not impacted by either Dodd-Frank or the Safe Act.
And, you can actually originate 3 seller financed sales within any single 12 month period, without having to be registered as an RMLO. The issue is that, because Dodd-Frank is so vague on the specifics of some of the regulations - having left the interpretation and implementation to the states - it is difficult for individual homeowners to ensure they are complying with all the state specific regulations and disclosure requirements, which is why most people recommending the use of an RMLO.
Dodd-Frank has been a complete cluster, since it's initial implementation. The fact it was poorly conceived & ill-written only exasperate the problems with that Act. Having been signed as long ago as it was, you would expect it had been fully defined by now, but it is still being interpreted. It's ridiculous.
Also not a lawyer...not legal advice...and I didn't even stay in a Holiday Inn Express!!!
what is an RMLO?
Originally posted by @Cyndy Trueblood:
what is an RMLO?
Residential Mortgage Loan Originator
Backing up a bit, selling a single unit or selling the park and all units? Big difference, selling the park is commercial and the D-F won't apply.
Dealers have different restrictions as to DF search for DF related posts by Ken Rischel, he's the compliance expert here on chattel liens and parks.
As to RTO, the are specifically addressed in the SAFE Act which was incorporated by DF and ARE covered transactions.
Additionally, ANY agreement of ANY kind that allows credits to a purchase price of a covered dwelling by allocating ANY part of ANY payment made by the resident is a financing arrangement.
Any system, method or devise used that is determined to be employed for the purpose of evading the intent of the Act is also a covered transaction.
Yes, to evade the Act, don't take any security agreement of any kind in the subject property. You could work a deal and take a speed boat or airplane or equipment as collateral for a loan, just not the borrower's residence or other covered property.
The two biggest issues are the ability to pay requirements and the RMLO seal on the note.
ABTP must be done properly, even if you do a deal that isn't covered, you still have predatory lending and dealing issues and if you don't conform there on any transaction you can still be nailed, may be not under DF, but nailed just the same.
The RMLO seal must be affixed to any covered note/agreement to be valid. Now, you hold a note, say you get hit by a bus, family wants or must sell the note.
How do you prove the note was originated legally? If the security is a covered property, how of do you prove you did less than 3 deals? How do you show that a seller actually lived in the property and sold a principal residence 5 years ago, can you show you were exempt?
These same issues can be attacked in a foreclosure 5 years later, can you prove you were in compliance at the time the note was originated, if you can't you may very well lose.
Me, I'd take any financing agreement to a RMLO with "proof of the exemption" **, pay him a few bucks to set his seal on that note with a statement exemption and attach it to the note, tape it with heavy clear tape, front of the statement to the last page of the note as an extension of the note. The RMLO doesn't need to originate or "underwrite" it, but does need a copy for retained records. ****
** this is not covered in the Act, however there is nothing to say that an RMLO can't make an affidavit of opinion as to compliance or applicability to the Act, they certainly may, if their sponsoring broker/lender allows them to, an independent mortgage broker might be the best choice.
**** this is not covered in the Act, it is an audit trail as there are record retention requirements and an RMLO should keep records of anything s/he puts their seal to.
In the note business, any investor who buys a note secured by a covered property can get hung on the discount later on as such notes filter into the market, I suggest you not buy a note concerning a covered property without a seal, either showing compliance of origination or a statement of exemption. :)
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