Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
Great article about new restrictions when selling a property and providing financing to the end buyer. These restrictions go into effect under Dodd-Frank on January 10. These are federal restrictions, not limited only to a particular state, and thanks to @William Crocker for providing the link:
Rental Property Investor · Greenwich, CT · Member since 2009 · 39 posts · 5 votes
12y
Ann, thanks for sharing this. This will definitely shake things up a bit in the alternative financing front. This will definitely have more of an impact on the sell side of things as this will severely decrease your pool of potential buyers for your deals.
I know I have a reputation of raining on parades, smashing dreams and tossing regulations out to block deals, but it's undeserved really, it's more about devising business strategies that work, I just get stuck in making those restrictive comments as there is so many non-compliance issues. :)
There may be some up side here. First, if there is a need for a service in our economy there will be those willing to provide it, mortgage originators, after they can get specific guidance in SF deals will likely enter the market, so finding one should be easier, IMO.
Secondly, as with any fed reg, it will be modified and amended over time. I'd say that a loan limit and an amortization table of some sort will be adopted to adopt common sense. I haven't double check the amortization having to be 30 years, the last I read was "fully amortized". I remember speaking to Cliff as he was starting out and he's a sharp guy.
It certainly doesn't make much sense allowing someone to buy a 30K car with a 5 year amortization and requiring that same person to buy a mobile home for 15K and pay it on a 30 year amortization. If that is the case I'd say a change will be on the way.
BTW, most states don't allow points on installment sales, that Missouri contractor charging points would be in violation anyway.
Back to the positive. Notes will be for sale, loan servicing will get a shot in the arm as there are also loan servicing issues. The issue of a contractor build selling with SF is pretty easy to get around, build under a contract with another entity and have that entity sell it.
As three sales are allowed, use the contractor strategy with other investors to spin a property off and allow them to SF the deal and the contract can be sold later on. I can see new entities being formed, new businesses, pooled investor players acting individually and staying within the guidelines. HMLs, private lenders, transactional funding and even a bank may enter to initially fund transactions through conventional financing to fund these conduits to an investor.
I recently discussed a note business operation with an attorney out of state about originating these SF transactions. Originators are in a position to purchase the note at the table, allow or set up sub servicing and line up refinancing the deals as borrowers become better qualified. Different rules apply to refinancing as costs can be covered by a note holder or originator, offering much better terms down the road at a very low cost usually motivates borrowers to refinance so a balloon is not really needed in many cases.
What ever is done on the more creative side, it's clear that it needs to conform to prudent lending practices, be consumer oriented and compliant, but it's possible to do business, it just needs to be restructured from what has been done in the past.
I'd say too, beware of gurus jumping on such ploys, don't even think of going there. :)
Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
12y
Biggest issue for us are our old notes coming due with Balloons.
In the past, if they had a record of timely payments, we would often roll it for another 5-10yrs. (Admittedly rolling it every 5 yrs is great for the Lender).
Commercial lending is going to see an influx of money & the reluctance of owner holds (30 yr term & no balloon) will generate very motivated principal residence sellers for cash.
Until then I will patiently wait for the 'Gulley work around strategy' :)
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Old notes will be grandfathered but if you have more than three you might modify them now, modifications will need to comply as it is a new extension of credit. Set your notes to a maturity distribution to 3 being done annually. :)
Old notes will be grandfathered but if you have more than three you might modify them now, modifications will need to comply as it is a new extension of credit. Set your notes to a maturity distribution to 3 being done annually. :)
We have way too many.
Our RE attorney is of the opinion if we just let them ride, (after the balloon date as we don't need the cash), we may be OK!! A lot of them are 12-15 year terms.
But fortunately many are then rented out by the borrower who moves out to better digs. So in that case we should be OK to re-write/modify them to a Commercial Mortgage??.
Residential Real Estate Agent · Cookeville, TN · Member since 2013 · 1k+ posts · 948 votes
12y
The Federal Government has NO Constitutional authority to tell me how I can and can not dispose of my own property - especially if there is no interstate commerce involved. I will ignore their unconstitutional s**t. Not even going to read the article.
Residential Real Estate Agent · Cookeville, TN · Member since 2013 · 1k+ posts · 948 votes
12y
The constitution is really pretty short and sweet and too the point. Really not that hard to understand, and really doesn't need so much "interpretation". The 10th amendment says - "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." Yes, there is the interstate commerce clause (which is very abused by the Feds by the way), but my house is not a mobile home and it will not be moved across state lines. And I can choose to sell it only to someone in my own state. No Feds should be involved. Damn, we should all be getting very angry at Washington DC by now (a long time ago actually).
The Federal Government has NO Constitutional authority to tell me how I can and can not dispose of my own property - especially if there is no interstate commerce involved. I will ignore their unconstitutional s**t. Not even going to read the article.
Bryan.......I could'nt agree more, I like many others that I know are getting tired of this government treating us as though we're babies that just need direction. All that I ask of my government is to get out of my way. In my opinion, one qualifier of being in the executive branch should be that you should have at least once in your life run a business and cut a payroll check or two. If nothing else to see the real world issues that come with making up new regulations that you "think" will help people because your bored on a Tuesday afternoon and need to show someone, somewhere that you are indeed a relevant part of the government. Man this stuff is getting old. That being said, I'm not anti regulation, lets just cut back on the stupidity. :)
Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
12y
@Bryan L. , you would fit in well in Wyoming. It amazes me how the government tries to regulate stupid. A lot of mortgages were entered into by folks who had no business buying a mortgage that big. End result when interest rates went up and housing prices dropped they went into foreclosure, they spent money they didn't have, even banks went belly up. The federal govt. says its ok we will help you pay your mortgage, with money they do not have. Instead of learning a lesson in finance they get addicted to something for nothing mentality. I do not have to be careful or work hard, I am not responsible for making a bad decision. A lot of good folks got hurt when the bubble burst, but hard lessons make us smarter. The credit card debt was way out of hand, the government did not do a bailout, end result credit card spending dropped dramaticly.
The best savers I have ever met were the survivors of the great depression, they learned. We are all responsible for our actions, the government seems to disagree.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Yes, each of us are responsible for what we get into, problem is not everyone is responsible, goes for borrowers and lenders, both may cheat, engage in criminal and immoral activities, pretty much what laws in society are suppose to do is to provide guidance in expected conduct.
Problem is you can't dictate morality.
Bryan L. , you might as well take the tags off your vehicles, stop paying taxes and just prepare to suffer the consequences. Good luck with that. :)
Residential Real Estate Agent · Cookeville, TN · Member since 2013 · 1k+ posts · 948 votes
12y
@Bill Gulley - Seriously, there's nobody to stop our government from getting even worse than us. We need to start standing up and telling them to stop. Enough is enough.
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
There are a lot of hype on this subject. Can someone show a official government document stating the rules not from someone trying to make a penny selling books about it.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
I agree, much to that point, but I was told a long time ago that belly-aching about a problem doesn't do anything without providing a solution to that problem.
I'm sure there will be changes to these issues in time. :)
Residential Real Estate Agent · Cookeville, TN · Member since 2013 · 1k+ posts · 948 votes
12y
@Bill Gulley - I'm not belly-aching. I'm providing a solution and taking action. My solution and action is to ignore their unconstitutional laws and run my life and my business as I see fit. And if they come after me, I hope that I have the nads to continue to stand and fight. And I hope that you and many others will have my back.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Sorry, nothing personal, but if you are advocating doing business illegally, regardless of your personal opinions, I'm not going to have your back. Ignoring laws and acting anyway you like is certainly not the way to effect change, or run any business.
I like driving on the Autobaun without speed limits, doesn't mean I'm driving a 100 mph on the highway just because I can.
That is no solution, the reason these laws were put in place was much about investors doing deals they had no real knowledge of that ended up screwing people over, some intentionally cheated others. Come up with a better way that allows investors to operate without being uniformed or cheating and you may have something.
If the kitchen is too hot, get out of the kitchen, RE is not an area of business to just go do what ever you like. Those of us who consider ourselves professionals follow the rules and try to ensure others do as well. Political views have nothing to do with enforcing regulatory policy, it only applies to setting policy if at all.
If people want to change things, run for office and then you can try to implement your views as to what the Constitution may mean. :)
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
Bryan,
I agree with you and look at all the bank that is doing business illegally, and the government does nothing to stop it and how will they stop anything else.
Residential Real Estate Agent · Cookeville, TN · Member since 2013 · 1k+ posts · 948 votes
12y
You see, they have us right where they want us. The vast majority of our citizens (including me) are good, decent, law-abiding people. We all think that obeying the laws is the right thing to do. Not just because of the potential punishment. But we think it's a character issue. Even our churches teach us that we are to obey our leaders and to obey the laws of the land. So, they have us right where they want us. We're like the frog in the pot with the water temp slowly being turned up, and we keep on just sitting there and taking it. When do we start fighting back? There is no one to protect us from our Federal government except us. The states are not even fighting back. Sure, we can vote, run for office, etc. But I believe that we have no reached a point where 51% (or more) of the population either sides with the freedom-takers, or are too dumb to care. By the way, I always treat my renters and tenant-buyers fair and ethically. Regardless of what the government says. But I will ignore their damn unconstitutional laws.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
I understand, I think they allow prisoners to have computer time in the library of the big hose, stay in touch and good luck, just remember not to drop the soap! :)
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
The feds will step on the poor and uneducated but when it comes to the big banks that doing everything wrong, nothing is being done to correct the problem, but I guess that is ok.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Actually, I do, but not the way you want to go about it. I speak to people in HUD, Congress, our finance department and try to make them aware of issues. No, I can't advocate breaking laws, but I can in making changes in our system, not out of anger or political opinions, making threats of illogical protest but from a technical aspect that addresses the issues.
Initially, the SAFE Act didn't have an exemption for 3 deals, where do you think that came from? They did recognize that granny may have to sell the farm that way or some small investor would get stuck with a property that needs repairs. The change cam from many who submitted logical justifications for some allowances, not by yelling at them about my rights as I see them.
Act professionally and follow the rules of the game and I'll have your back.
Joe, yes, that's much like telling a cop you're going to drive 100 mph and then ask him not to give you a ticket.
BTW, may be hasn't heard, Bank of America just got nailed with a 13 Billion dollar fine along with other big players getting fined and they are still seeking criminal charges. :)
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
Bill,
Let's be honest. The government needs to clean their own house before they start enforcing rules, and I hate to say this the FDIC has always looked the other way on enforcing rules against the powerful and rich.