Dodd-Frank 2014

Real Estate Investor · Grove (Grand Lake), OK · Member since 2013 · 10 posts · 1 vote

What's the latest analysis with regard to Dodd-Frank 2014 which comes into effect January 10th as far as how it relates to real estate investors doing options, lease purchases, seller financing, etc.?

0 Reply

253 views

Most Popular Reply

Bill Gulley

Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes

12y

The problem is not with the written material but having unqualified persons providing any interpretation of law.

Brian, is that the same video you had already provided a link to?

If I were doing videos, I'd dress a little better :)

2 Reply

See this reply in the discussion

46 Replies

Jump to latestLatest

Sort by

Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Just FYI as to the CFBP web site. It was discussed in the news in contrast to the healthcare web site (no, not going there). The point was made that the federal agencies are tied to procurement requirements that do not ensure the agency gets the best deal, the best provider or best value for the money as obvious with the best known government web site today. The CFPB avoided many of these issues in the beginning as they were the first agency to build itself on a technical platform rather than a heavy sided human resources basis.

In the past agencies were established by filling positions required for the jobs or functions required then hired out technology to fit the needs of workers. The CFPB built its agency the other way around by hiring top notch techie types to develop oversight functions and then filled in the manpower required. Supposedly the most efficient and tech advanced agency in government.

I thought that was interesting from an efficiency aspect. From their examination manuals I can see a much easier process for compliance examinations than the old days. Determinations are still subjective but the reference and support material is easier to follow and instantly available.

Keep in mind, seller financing in real estate is a very small sliver of Dodd-Frank as it covers a vast area of consumer lending issues, student loans, title loans, credit cards, auto financing, rent-to-own furniture stores, IOW, all consumer lending. They can get involved in any consumer transaction!

Read all you can or care to, just be cautious in interpretations of the material, don't read things into someting making assumptions that aren't there. :)
0 Reply
Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Originally posted by Brian Gibbons:

*****Brian, This does not apply to seller financed mortgages by investors selling.
This is a good example of putting out information that clogs the understandings of investors as it is not appropriate for the most part.

Creditors mentioned here, as to mortgages and originators are institutional lenders, banks and funding entities such as a mortgage company, not to individuals.

The underwriting mentioned does shed some light on customary loan processing and underwriting that can be and should be adopted by an MLO in assisting a seller.

Another aspect is that seller financed mortgages are not "qualified mortgages" with respect to safe harbor issues allowed for institutions. Origination fees to a lender don't apply to a seller, balloon exemptions do not apply to individual investors nor due holding periods for any note.

The safe side is not to post irrelevant information to be consumed by non-lenders as if it is applicable to RE investors.

You can certainly listen to it and see where brokers and originators need to tread, but this is not for an individual seller. That's not to say that an individual seller is not held to similar requirements under prudent lending practices, origination and processing and ability to repay assumptions. But this is not for individual seller consumption :)

Ability to Repay and Qualified Mortgage Rule

0 Reply
Jimmy Hong
Flipper · Irvine, CA · Member since 2013 · 349 posts · 45 votes
12y
Originally posted by Will Barnard:
Can you repeat that Bill, I am confused!! :)~
J/K by the way! That was a long enough read, I could read it ten times and still not understand it all.

I try to read a lot of @Bill Gulley posts but I maybe get 65% of what he says, and that's on the 2nd read too!
0 Reply
Pat L.
Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
12y
Originally posted by Jimmy Hong:

Originally posted by Will Barnard:
Can you repeat that Bill, I am confused!! :)~
J/K by the way! That was a long enough read, I could read it ten times and still not understand it all.

I try to read a lot of @Bill Gulley posts but I maybe get 65% of what he says, and that's on the 2nd read too!

I think you have to vote on it before you can understand it :)

(or at least for Bill)

I admire anyone attempting to make sense of the tangential vagaries of an obscure legal dissertation that’s in the guise of an implied 'consumer protection law' written by addled minded politicians.
1 Reply
Account Closed
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
Pat,

Everyone thinks they know the law on Dodd-Frank law. I say to take it with a grain of salt and only listen to a lawyer, who have experience in the Dodd-Frank law that can give straight answers.

Joe Gore
0 Reply
Pat L.
Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
12y
Originally posted by Joe Gore:
Pat,

Everyone thinks they know the law on Dodd-Frank law. I say to take it with a grain of salt and only listen to a lawyer, who have experience in the Dodd-Frank law that can give straight answers.

Joe Gore

Joe we have a great attorney but it's still a quagmire of uncertainty!!!

Personally I am no longer comfortable entertaining traditional forms of seller financing. Yet over the last 25-30 years we have helped many achieve home ownership.

Instead we are concentrating on investor financing &/or multi member LLC's to skirt some of the unknowns, albeit with full legal disclosure & advice.
0 Reply
Matt B.
Investor · Vincennes, IN · Member since 2013 · 223 posts · 108 votes
12y
The difficult part is finding an attorney with experience in Dodd-Frank. We have been paying a couple of attorneys (in different states) to figure it out for us. They do not seem to know, nor do those who are put in charge of regulating it.

Some of us are taking a wait and see attitude to see how it plays out. And adopting some different, less regulated strategies in the meantime.
0 Reply
Brian Gibbons
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
12y
A strategy that makes sense to me is buy on sub 2 and lease long term until the dust settles.

Renting

on lease and a pure option without the option being a financing device (no rent credits) is a possibility.
0 Reply
Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Easy way, don't even try to understand what Brian posted, It doesn't apply to you as an investor at all.

Pat and Matt, I really doubt you're going to find a real estate attorney that understands what that video recording from the CFPB described as it is in lender'ease, not English. It's a communication to lenders not attorneys or the general public.

Brian, problem is any agreement to pay an existing debt I owe is an extension of credit from me to you. If I owe a bank 50K and I make an agreement for you to pay it, it is still an obligation owing to or through me. It is that agreement that constitutes an extension of credit. I hope you get that concept, I can't make any agreement for you to pay directly to me or for my benefit, it's the same thing.

An option that is not financed is fine, it's an amount paid for the right to purchase over the term of the option, it's not financing secured by or conditioned upon the conveyance of title. A lease is a lease, not an issue at all. A straight lease option is not an issue.

Before diving into the regs and final rulings you need to understand lender phraseology and understand what is meant by qualified and unqualified mortgages, what is meant by income qualification or ability to pay. As stated in the recording, there are compensating factors that can be applied to justify making any extension of credit.

The best I can do is to put together secondary market or FHA underwriting rules along with examples of the types of factors that can justify extending credit. It's not rocket science but it is a conceptual and subjective matter that really lies in common sense and prudence.

0 Reply
Curt Smith
Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
12y
So I emailed the CFPB with a complaint they've tared good investors with the bad ones. I got a call from a lady and she emailed me these links. The pg 22 reading is interesting. What I'm still not sure of is if I do under 3 owner financed deals a year if I have to use an MLO? Bill G reminds us that even if not we have to accomplish the same qualifying work end goal. So to me, why not just use a MLO and be over that issue.

It seems that my 9% interest rate earns me high cost mortgage. Which I'm now viewing meaning, I don';t have a choice I have to use an MLO. In my view, given how tight they wrote the Qualifying Mortgage (QM) criteria few investor loans will be within 1.5% of floating prime, all of us will be in the high cost boat.

--- From CFPB

http://www.consumerfinance.gov/regulatory-implementation/

http://files.consumerfinance.gov/f/201311_cfpb_updated-sticker_lo-comp-implementation-guide.pdf [Page 22 discusses seller financiers.]

You may also consider reviewing a webinar that is posted online at http://www.mbaa.org/Compliance/cfpbrecordings.htm The webinar is available to the public even if you are not a member of the organization.

Search on small entity compliance:

Small entity compliance helps:
http://search.consumerfinance.gov/search?utf8=%E2%9C%93&affiliate=cfpb&query=small+entity+compliance
0 Reply
Curt Smith
Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
12y
We are selling some lower priced property in rural counties and if the county is deamed "rural and underserved" the lender gets some wave on something???

Rural and underserved counties:
http://www.consumerfinance.gov/guidance/
0 Reply
Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Great find, I've seen or been through about a 1/3, what I can say is the salaries have really gone up since I was one the regulatory side, holy cow, $187,000+ great career for the young'ns with tech and accounting/auditing skills. Much more analytical than financial institution examines it looks like, as they are looking for trends and analysis that reveals compliance issues rather than so much as on an occurrence basis, can't tell so much yet.

Anyway, as to the issues, take care when reading that you are not reading what pertains to lenders, "lender" will be regulated lenders, not necessarily you as a seller financing type, so understand where you are and what is applicable to you as an investor type.

Slow down Cowboy Curt, they'll get screwed up reading "lender" exemptions, applications and Originator requirements without understanding the differences. But thanks for the links. :)
0 Reply
Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Originally posted by Curt Smith:
We are selling some lower priced property in rural counties and if the county is deamed "rural and underserved" the lender gets some wave on something???

Rural and underserved counties:
http://www.consumerfinance.gov/guidance/

No, the small county bank, People's State Bank of Nowhere gets a break. Underserved areas are following USDA guidelines of under served areas.

The LMO will know what applies in their area.

None of this is for Ivan Investor to sit down and write a note on a transaction that is regulated.

If you understand what you're reading it's informative, if you don't it may get you in trouble thinking you are the "Lender". :)
0 Reply
Pat L.
Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
12y

the above blog is an interesting read.......

0 Reply
Aaron Junck
Real Estate Investor · Sioux Falls, SD · Member since 2013 · 415 posts · 84 votes
12y
Awesome link @Pat L.

Thanks for sharing.
0 Reply
Will BarnardPro Member
Moderator
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
12y

What an idiot! Politicians, this one in particular, cause me to vomit.
Podcast Guest on Show #130
0 Reply
Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Well, get a barf bag, I would have thought you'd be sicker with Frank than Dodd. Pass me a bag for Ted Cruse....
0 Reply
Will BarnardPro Member
Moderator
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
12y
Originally posted by Bill Gulley:
Well, get a barf bag, I would have thought you'd be sicker with Frank than Dodd. Pass me a bag for Ted Cruse....

I hear that Bill! Actually, though the photo is only of Dodd, you are correct, Frank is equally, if not more nauseating. :)
Podcast Guest on Show #130
1 Reply
Mike Gibson
OP
Real Estate Investor · Grove (Grand Lake), OK · Member since 2013 · 10 posts · 1 vote
12y
I'm not sure how you can separate 'politics' from 'business'...especially when these 2 clueless men (I use that term loosely) formulate laws and regulations that affect our real estate businesses, without having been in the 'real world' for decades, if at all. So, it's not politics...it's business. Our business.
1 Reply
Will BarnardPro Member
Moderator
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
12y
Well said Mike, I could not agree more. In fact, it should be a law that any politician writing a new law must have experience in the filed he/she is writing laws for. Certainly you would not want your auto mechanic to write instructions on how to perform surgery for doctors, so why should a politician write any law regarding an industry they know nothing about!
Podcast Guest on Show #130
1 Reply
Mark UpdegraffBusiness Member
Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 715 votes
12y
If ya'll haven't read Thomas Sowell's "The housing boom and bust" you should pick up a copy. He's a great author & economist and like his mentor, has a great knack for explaining complex issues with simplicity.
Podcast Guest on Show #112
Updegraff Group Realty4.742 Reviews
Website View Page
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.