How to find MLO to originate seller financed loans

17 Replies

With Dodd-Frank in effect.... has anyone found a loan officer who will/can originate loan docs for seller-financed loan? Our go-to mortgage officer isn't allowed to; he's at a mortgage company. Willing to give me templates to use but I'm almost certain I need him to generate the entire loan packet.

I am looking for one in the Seattle area.

If you've found someone outside of WA state, would you please share how you went about finding someone and elaborating what they are preparing for you?

I haven't had much luck asking around at local REIAs.


Thanks!

Angel, I knew this was going to be an issue, having a mortgage originator's license doesn't qualify one to underwrite a SF deal, they may have the authority to do so but finding one to take responsibility is another matter.

I suggest you call the consumer bunch at the CFPB and let them know the difficulty. Ask them who you can go to, they have access to the list of originators and brokers!

Have you pre-qualified the buyer? Can they get a loan? If they could get a loan commitment you might have luck finding an attorney, seeing a commitment might ease their concerns and they can originate under certain conditions, they may be able to justify the client relationship, do a simple estate plan and incorporate the property into the plan.

Are you sure your deal is applicable to the regulation? Owner occupied?

Details might give us some options. :)

Angel,

I have used owner finance documents via NWMLS templates which thus far have worked out fine.

Originally posted by @Zach Schwarzmiller :
Angel,

I have used owner finance documents via NWMLS templates which thus far have worked out fine.

I don't believe she is talking about forms, she's talking about compliance and finding someone to originate the deal with forms she already has access to.

Does that "NWMLS" have a mortgage originator to underwrite the note and take responsibility for it? :)

@Angel Prentiss - I'm no attorney, but I think there are exemptions to the DF law. For example, if you are only doing a few o-f deals per year, you may be exempt. I'm not certain about this, but you should look into this option.

Yes i will do the prelim prequalify. Loan officer has to do the final review and provide loan docs. We want to do more than 1 per year and per attorney, using multiple llcs won't work-- see right through it. I already have promissory notes and deed of trust. Just need the MLO and anything else he/she has to provide per law.

@Angel Prentiss,

I think you will be ok. Just call around to a few title and escrow companies to see if they know who can originate everything for you. There are a lot of hype and misinformation on the DF act which has not been tested in court yet that I know of.

Joe Gore


Call the CFPB, fill their ear. You're correct not to use the flim flam tactics.

Might see if a lender can make a loan and then you purchase it.

Ignore the obvious bad advice. :)

One important note: DF does not apply if selling to investors, so if you are selling to an investor you have no concerns.

If you are not selling to an investors my understanding is that there is one exempt transaction allowed per year per INDIVIDUAL. If your property is in an LLC no exemption, so transfer it out. If it is held by two people both would lose their exemption for the next 12 months so for married people it might make sense to move a property to only one persons name if you think you might have another sale within 12 months.

If you still want or need an MLO I would call RE agents that are offering SF and see who they are using. I know there is one MLO here in Phoenix who will do these for $500 or so. Cant recall their name right now and it probably would not help you much since you are in Washington.

Originally posted by @Bob E. :
One important note: DF does not apply if selling to investors, so if you are selling to an investor you have no concerns.
If you are not selling to an investors my understanding is that there is one exempt transaction allowed per year per INDIVIDUAL. If your property is in an LLC no exemption, so transfer it out. If it is held by two people both would lose their exemption for the next 12 months so for married people it might make sense to move a property to only one persons name if you think you might have another sale within 12 months.

Bob, totally disagree and I believe the attorney who suggests this, is missing the SAFE Act portion that stipulates any system or method utilized with the intent to circumvent the intent of the law will be subject to the Act. There is also the theory of who is really behind the door, you also have issues of related parties, marital interests and comingling of assets.

If I were the regulator, I would not buy it. Regulators go through an administrative process in issuing orders to cease and desist and levy administrative fines, HUD can bar you from dealing in many aspects of housing and they can put you out of business without ever being in a court room. Attorneys who do not specialize in administrative law with agencies may miss that it's not like court sometimes.

Another guru attorney tells folks basically, "hey the didn't make their payments, to get you they have to sue, that means getting an attorney....if they can afford an attorney and go after you, why didn't they just make the payment"? Well. he's wrong too, the CFPB has a phone line for reporting, reports can be made by anyone, your neighbor can report a violation. The borrower has documented evidence. So, it boils down to, can your borrower afford a few phone calls and some postage stamps, they won't need an attorney, and that's why we have prosecutors.

Don't try to out smart the system in place, many have tried and some are wearing orange jump suits. In reality, I'd be more concerned about the hefty fines and being black listed from RE, granted, you'd really have to mess up to wear orange, but life could change for you doing a lot less. :)

Feel free to disagree but I just attended a local class taught by and attorney and this is what he was teaching. I also have this from a few other sources as well.

Bob,

Can you post the lawyers name and state that taught the class?

Joe Gore

Originally posted by @Bob E. :
Feel free to disagree but I just attended a local class taught by and attorney and this is what he was teaching. I also have this from a few other sources as well.

Yes Bob, and he called me for advice as he was getting started. You're new, you'll learn more here. Just understand, when the stuff hits the fan, they aren't liable for what you do. You don't have an attorney client relationship and you'll be hard pressed to find another attorney to seek any damages from another attorney. Some call it a license to steal, I know another attorney who has over a decade left on his sentence, but that was a different issue.

Clint does have some good stuff, but being a past regulator, I'd disagree with him on that ploy. Time will tell won't it. Read the Act for yourself. Good luck :)

@Bob E.

Bob not true in all states.. In Oregon any financing of a 1 to 4 unit is covered by dodd frank..... although if it is investor to investor the paper work is minimal but you still need an NMLS license.

I believe AZ is the same way .. At least that's what I have been told

State of WA were I have an office does not require the license in the scenario you describe.

@Angel Prentiss Honestly, I'm not sure you're going to find someone until there is more clarification from the CPFB about using LMOs in seller financed deals. The laws state you can't even negotiate or offer the loan if you aren't an LMO. So, that brings up all kinds of problems and issues with just advertising and negotiating the purchase price in a seller financed deal.

I found one local hml lender/broker that said he would do it for 4 points and charge it to the borrower. He claimed he was "taking all the risk". At that point I knew I was talking to someone that I wouldn't be working with. Since when does the loan originator take all the risk? Last I checked lenders are on the hook for loans they make no matter who created the application and file.

This topic has come up plenty here and I'm not hearing from anyone offering to do the originations. After DF passed a lot of people kept repeating "use an LMO" like a mantra. But there don't seem to be any volunteers.

Please keep us posted about what you discover.

Joe, Class was in Arizona, our laws may be a little different here but DF is not a local law and this class was specifically of DF for RE licensing credits, taught by a local RE attorney. I have seen the same information in other places and will stand by this until I am presented with different data by a reputable source.

That said I would still recommend using a LMO to make sure you get all the documentation necessary to smoothly resell the note in the future.

Other states may have laws in addition to DF so actual milage may vary.

Originally posted by @Bob E. :
Joe, Class was in Arizona, our laws may be a little different here but DF is not a local law and this class was specifically of DF for RE licensing credits, taught by a local RE attorney. I have seen the same information in other places and will stand by this until I am presented with different data by a reputable source.

That said I would still recommend using a LMO to make sure you get all the documentation necessary to smoothly resell the note in the future.

Other states may have laws in addition to DF so actual milage may vary.

My understanding of the exemptions is similar to yours. One deal per year if you are a person or estate with no LMO requirements and no ATR requirements. 3 deals per year for corps and entities with no LMO requirement but still need to do ATR. The ATR requirement doesn't seem onerous to me. Plus you'd want that in the file if you want to re-sell the note. I don't do balloons so I ignored all the details about which transactions allow them.

Seems like between me and my adult children and my husband we have enough exemptions per year for notes we want to hold long term. If I run out of exemptions, that means business is really good.

Hi, all, any updates on this topic, now that its been a year?  

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.