How to bypass Dodd-Frank? Lets discuss options. Anyone?
Specialist · Charlotte, NC · Member since 2013 · 9 posts · 0 votes
How to bypass Dodd-Frank? Lets discuss options. Anyone?
Most Popular Reply
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
11yWell, let's cuss and discuss right here and call your attorney and ask them to come to this thread as well.
Dodd-Frank SPECIFICALLY includes "Rent-To-Own" those 3 words are contained, in that order, as a covered transaction.
For those in the advanced financial training phase, any payment, other than an initial down payment, that is made over the term of a contract where credit is given toward the sale price is a financing arrangement. Any financing arrangement that is secured by residential property or that allows for the delivery of an ownership transfer of residential property, for consumer use, at a later date is a secured financing transaction.
But, I can tell you how to avoid Dodd-Frank, don't finance any residential property in any manner for an owner occupant. The other way is to comply and use an authorized RMLO if you can find one that is compliant under a brokerage or registered lender......good luck with that.
BTW, the Act also states that any method or program that may be devised that effectively causes a covered property to be exchanged for payments is also a covered transaction. :)
29 Replies
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes11y
Well, let's cuss and discuss right here and call your attorney and ask them to come to this thread as well.
Dodd-Frank SPECIFICALLY includes "Rent-To-Own" those 3 words are contained, in that order, as a covered transaction.
For those in the advanced financial training phase, any payment, other than an initial down payment, that is made over the term of a contract where credit is given toward the sale price is a financing arrangement. Any financing arrangement that is secured by residential property or that allows for the delivery of an ownership transfer of residential property, for consumer use, at a later date is a secured financing transaction.
But, I can tell you how to avoid Dodd-Frank, don't finance any residential property in any manner for an owner occupant. The other way is to comply and use an authorized RMLO if you can find one that is compliant under a brokerage or registered lender......good luck with that.
BTW, the Act also states that any method or program that may be devised that effectively causes a covered property to be exchanged for payments is also a covered transaction. :)
- Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes11y
Hi Kumar, I suggest you search "dodd frank", "seller financing under dodd frank" etc. There's 100's of posts on this topic.
Just to catch you up and others who may find this thread in the future...
To start off, it's been widely agreed upon especially in the DF threads, that "my attorney says" is 200% certain to be wrong wrong wrong re DF. So toss what he said. This is banking regulation, 9000 pages, no RE attorney knows anything about banking regulation. They are all guessing at your expense because it is you who will pay the fine not him. LOL I've come to loath lawyers and take what they say with a grain of salt. (BTW a law degree is only 3 years of crash study on top of (any) 4 year degree including English Lit). What could they know out side of stuff they do every day? (ask what an attorney does every day, then consider their comments IMHO).
That said, there are "exemptions" to having to being licensed as a BANK, and still being able to lend to owner occupants, doing a seller financed loan. This has been discussed here. Search BP "exemptions Dodd Frank".
The DF statute says (in effect), any attempt to bypass this regulation is a covered activity. Sooo,,, a 25 yr lease option, and deeding the title over at the end, is NOT a work around. That is a loan to an occupant and is covered by DF, thus you have to follow the steps, under one of the exemptions, if that's possible. Or not do the deal if you don't fit an exemption. :)
Why don't you post your work around idea? And we'll talk about it one way or the other.
Do you have an interest in seller financed deals to occupants? IE I'm interested in your business model that has you wade into this topic?
- Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes11y
LOL Bill beat me to this thread!! Great!
- Residential Real Estate Agent · Atlanta, GA · Member since 2009 · 381 posts · 134 votes11y
Kumar, find real estate attorney.. If the guy your dealing with doesn't know "rent to own" basics, what else doesn't he know.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes11y
Originally posted by @Ericka Parrott:
Kumar, find real estate attorney.. If the guy your dealing with doesn't know "rent to own" basics, what else doesn't he know.
Hopefully, the real estate attorney will have gone to the golf course and heard one of his lawyer friends who deals in banking and finance talk about Dodd-Frank. Hopefully, that will urge the real estate attorney to investigate what now constitutes a financed transaction and modifies his understandings from law school. Better yet, hopefully the real estate attorney will tell him to go see a finance and banking type, but that's almost like admitting they don't know anything, that's unlikely. :)
- Specialist · Charlotte, NC · Member since 2013 · 9 posts · 0 votes11y
Strategy 1: Short term lease option (<2 years??). Since this is not financing by the seller, it should be ok?
Strategy 2: Wholesale the deal, put it under contract and assign with a small profit margin on owner financing offered by the seller. You might not make much but a couple grand.
Just ideas. I could be totally wrong. Please advice. - Specialist · Charlotte, NC · Member since 2013 · 9 posts · 0 votes11y
I meant jack up the down payment by a couple of grand.
- Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes11y
There is no "work-around" for Dodd-Frank. And, as @Curt Smith noted, Dodd-Frank has been discussed and debated here ad nauseam.
Dodd-Frank is very specific, direct and clear regarding seller financing and covered owner-occupant financing. It leaves room for states to determine some rules of implementation, including specific disclosures and such, but Dodd-Frank, as applied to seller financing and real estate, IS NOT a piece of swiss cheese legislation. Now, the actual Banking sections of the law are still being interpreted, but this part is exceedingly clear.
Additionally, Dodd-Frank doesn't stand alone in creating new protections for owner occupant buyers. The Safe Act also places restrictions and requirements on seller financing.
As @Bill Gulley suggested, find a licensed RMLO and let them shoulder the burden of conformity, instead of finding work-arounds.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes11y
Originally posted by @Kumar Chin:
Strategy 1: Short term lease option (<2 years??). Since this is not financing by the seller, it should be ok?
Strategy 2: Wholesale the deal, put it under contract and assign with a small profit margin on owner financing offered by the seller. You might not make much but a couple grand.
Just ideas. I could be totally wrong. Please advice.You know why newbies get in trouble, lose money, mess up, fail to close transactions? Because they try to get creative, think out of the box when they don't know what is even in the box to work with.
A straight lease and an option is just fine, but then what? An option triggers the due on sale clause, a lease less than 3 years does not.
Is that option a "Real Option" intent of buying the property or is it a "Financial Option" a derivative of the intrinsic and economic value of holding the option to sell? That valuation will tell you if you can "just bump up" the price a few grand and not get into predatory dealings.
You cannot contract for a seller to provide financing and assign that contract without the seller's consent. Basic contract law.
Let's drop back a punt, learn the basics of real estate before dealing in real estate and learn what is in the box, legal requirements of transactions before you begin trying to devise off the wall strategies. :)
- Northern, CA · Member since 2014 · 674 posts · 444 votes11y
@Bill Gulley I had some interest in learning lease options to have that tool in the bag if the right situation presented itself but I've been unable to figure out all the details to make it legal.
Is there somewhere to get a "cliff's note" version or do we need to read all 9000 pages?
My understanding to this point is a lease option of less than 3 years is ok, no rent credits towards purchase price (but possibly could be applied to closing costs?).
Work with an RMLO to determine applicants ability to get credit for purchase within option expiration time frame.
Until I can figure out the proper way to setup these types of transactions I will not be using them, if ever.
- Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes11y
What is not a financing arrangement is a lease with a separate option that has no rent credits toward purchase price or toward down payment which does not fall under Dodd Frank
I use a RMLO with RTO buyers, though I don't need to, just good insurance.
Lease purchase is a good solution where there's a lease and sale and purchase agreement and a nonrefundable 3% earnest money, which is also not under Dodd Frank
Using an RMLO for all your deals if you're an agent protects the seller just in case the buyer gets an attorney and says that they weren't properly underwritten as per "The ability to repay rules" see cfpb site.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes11y
Originally posted by @Lee S.:
@Bill Gulley I had some interest in learning lease options to have that tool in the bag if the right situation presented itself but I've been unable to figure out all the details to make it legal.
Is there somewhere to get a "cliff's note" version or do we need to read all 9000 pages?
My understanding to this point is a lease option of less than 3 years is ok, no rent credits towards purchase price (but possibly could be applied to closing costs?).
Work with an RMLO to determine applicants ability to get credit for purchase within option expiration time frame.
Until I can figure out the proper way to setup these types of transactions I will not be using them, if ever.
No, LOL, before you could study the 9000+ pages of DF and the related regulations, I will have the "Cliff Notes" on line for you, hopefully NLT 4 weeks.
And, you're wise to wait.
In a nut shell, the lease-option to purchase will be a great tool when properly applied. It is going to require a more sophisticated approach than what most have been use to. You can pretty well burn your guru library if you want to stay out of legal and tax issues.
While things become more sophisticated, that doesn't mean harder necessarily.
Yes, you can credit a buyer with certain closing costs, not all and that needs to be done per the loan program selected. You also need to address credits that may be contractually obligated and not expensed as credits as a closer may then give a credit to the sale price, which would be a violation. Costs need to be known and properly accounted for as a seller concession.
For other "tactical" reasons, it would be better to enter your option after time passes with the lease, but that's another issues.
Just hold your horses, we can solve all this :)
- Northern, CA · Member since 2014 · 674 posts · 444 votes11y
@Bill Gulley @Brian Gibbons Thanks guys, I know you two are the go to on this issue and I've spoke with Brian a couple of times on the phone. I do think it's a great tool but I have no interest in legal issues, in the mean time I'll stick to doing deals that get me on title or listing as an agent.
Brian, you had given a link to a website/company that is an RMLO and qualifies the buyer and they charged a reasonable fee. I had booked marked it but my computer crashed last week and I lost all my bookmarks. You mind giving me that link again?
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes11y
Let me give a caution about RMLOs. They are not underwriters. They also must be operating under a registered broker sponsoring them, a lender. RMLOs acting independently are not in compliance, they may think they are. It has to be a registered and compliant brokerage or lender ot a RMLO working under them to originate seller financed transactions.
Use a bogus RMLO, you aren't in compliance!
So, if there is some RMLO out there doing SF deals at XXX$ a pop, better check that they are under a registered broker/lender signing off on SF transactions. Most won't due to liability issues. A bank RMLO can't touch a SF loan. :)
- Specialist · Charlotte, NC · Member since 2013 · 9 posts · 0 votes11y
So everyone agrees if its a lease option with less than 3 year term, it should be OK. As long as there is no financing and credits towards the purchase price, we are good.
One final question. Is there a limit I can charge for the lease option? I have prospects that are willing to pay up to $8K on a house that has tax value of $50K but Im selling it for $45K. Its almost 18% option fee. Is that cool?
- Northern, CA · Member since 2014 · 674 posts · 444 votes11y
I don't know if you will get in trouble for that but I personally don't think that's cool. I think 3-5% is the way to go which makes it tough to make it worth it on sub 100k homes.
@Bill Gulley Thanks for the advice on the RMLO's.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes11y
Originally posted by @Kumar Chin:
So everyone agrees if its a lease option with less than 3 year term, it should be OK. As long as there is no financing and credits towards the purchase price, we are good.
One final question. Is there a limit I can charge for the lease option? I have prospects that are willing to pay up to $8K on a house that has tax value of $50K but Im selling it for $45K. Its almost 18% option fee. Is that cool?
No, understand that the term of the option can trip the due on sale the day after you do it, technically, that is a business chance that you take. A lease less than three years (1,094 days) does not trip the due on sale clause, two different issues. a 3 year option "probably" be okay, yes, probably so.
10% is a customary cap for a residential option, go above that and you can't justify the value of the option sold on a residential property and at 10% you'll have other issues:
1. the buyer will have an equitable interest that under state laws can require a foreclosure.
2. You'll trip the economic benefit the IRS will be looking at as a disguised sale, they will treat it as a sale at 10% or more and could even below 10% if not properly justified.
$4,500 is as high as you better go with a $45,000 sale price!
And, if they are not a qualified buyer, you have predatory dealing laws to contend with.
Make the term too short with an unqualified buyer that can be predatory as well. You can't be seen as setting a buyer up to fail, you need to be able to prove that the buyer is capable and if needed, they receive reasonable assistance they need to succeed.
The better qualified the buyer is, the shorter the option term can be, the less qualified, the longer it needs to be. If you have no mortgage, doing a five or even ten year option isn't out of the question, with a mortgage, that's a risk you need to evaluate.
Options are not just some slam bang deal you put on a property or a buyer as an excuse to put some money in your pocket, as many are doing and as gurus suggest.
You'll have less liability involved giving an option to another investor on a commercial basis, as a consumer arrangement, better pay attention.
There are methods to evaluate the price of an option, all being beyond the scope of small residential operators or owners which is why they get a "break" as to a 10% round number, it's easy to understand, compute and can be agreeable in good faith dealings. Not saying use 10% as you have other issues as mentioned. If you go lower, like 3 or 5% your option price can dodge other concerns and not be into deep predatory waters. It's a business decision and you need to understand option contracts before jumping in. Good luck :)
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes11y
On a related note, many people on here...and in the world do not fully understand how "laws" work. They think that they only need to read the legislation at hand. This gets so many people into trouble. They say I did X, but the law says Y, and do not understand how they get into trouble.
Laws go much further than the legislation as written. We can all go back to high school civics for a reminder of how government works. The Legislative Branch writes the laws. The Executive Branch enforces the laws. The Judicial Branch interprets the laws.
All three of these come into play with the laws we need to obey. Government agencies (Executive enforcement) create regulations, and memos that have the full force of law. The courts interpretation of the laws (Case Law) has a binding affect on what is legal.
A perfect example of this all comes into play in Fair Housing law. People think that as long as they do not "discriminate" or "steer" that they are in the clear, because the law says those things are illegal. But they do not give consideration to HUD memos and regulations, and if they do will often even ignore the case law. Also so much of this is almost impossible to find on the internet. I have searched and never been able to find all the fines that landlords and Realtors and other professionals are assessed all the time Fair Housing violations..yet I know these things happen because I know individuals that have been fined.
So just remember the "law" is much more than what is written in the actual legislation, and also remember arm chair lawyers wind up in jail or with fines because they think they can accurately interpret the law better than lawyers.
District Invest Group545 Reviews - 10yNate T.Pro MemberInvestor · Tempe, AZ · Member since 2014 · 142 posts · 73 votes
Originally posted by @Bill Gulley:
Originally posted by @Lee S.:
@Bill Gulley I had some interest in learning lease options to have that tool in the bag if the right situation presented itself but I've been unable to figure out all the details to make it legal.
Is there somewhere to get a "cliff's note" version or do we need to read all 9000 pages?
My understanding to this point is a lease option of less than 3 years is ok, no rent credits towards purchase price (but possibly could be applied to closing costs?).
Work with an RMLO to determine applicants ability to get credit for purchase within option expiration time frame.
Until I can figure out the proper way to setup these types of transactions I will not be using them, if ever.
No, LOL, before you could study the 9000+ pages of DF and the related regulations, I will have the "Cliff Notes" on line for you, hopefully NLT 4 weeks.
And, you're wise to wait.
In a nut shell, the lease-option to purchase will be a great tool when properly applied. It is going to require a more sophisticated approach than what most have been use to. You can pretty well burn your guru library if you want to stay out of legal and tax issues.
While things become more sophisticated, that doesn't mean harder necessarily.
Yes, you can credit a buyer with certain closing costs, not all and that needs to be done per the loan program selected. You also need to address credits that may be contractually obligated and not expensed as credits as a closer may then give a credit to the sale price, which would be a violation. Costs need to be known and properly accounted for as a seller concession.
For other "tactical" reasons, it would be better to enter your option after time passes with the lease, but that's another issues.
Just hold your horses, we can solve all this :)
Hi Bill,
Did you get the cliff notes of Dodd Frank written up?
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes10y
Hey Nate, you're making me look bad.....LOL! I have so many projects I haven't researched the D-F Act since Nov-Dec. We will be blogging about this on GREA and BP later on.
You can begin reading Title XIV, at Sec. 1401. Don't skip 1402, definitions.
Somewhere around here I have a CFBP report drafted for lenders, it's about 350 pages and it's the closest thing to Cliff Notes I know of.
This Act has been the center of over a thousand threads I'm sure and as we (BPer's) began discussing the topic a lot of poor and bad information was put out. The D-F Act has been an emerging giant amending over 30 federal laws over what was initially about a 3 year period, but this giant is just now waking up. The amendments to the Act keep coming and some final rules don't seem to be final! It's not that all of us who discussed this Act in the past were wrong or in left field at the time, but we can see now that some of our opinions may not be applicable today.
Yesterday a post was written by a popular member saying to "go to a RMLO" this has been the consensus by all of us, until now!
Actually, the law has two edges, create more than 2 or 3 loans seller financing and you become an "originator".
Those who originate mortgages are required to be licensed as a RMLO.
If you extend even one loan, you're a "Lender".
The requirement is that a lender must apply the ability to pay rules.
There is no educational material or topic concerning seller financing for anyone who takes the RMLO class or exam, nothing is taught concerning seller financing. The only similarity between the loans a RMLO is taught to process and a seller financed note is just that, the process. There are no specific underwriting rules for seller financed loans. It is simply an assumption that the RMLO must apply qualifying mortgage rules in the same way they originate secondary market loans.
Our assumptions have not been accurate, while we do have debt to income ratios, credit analysis, employment status and income angles to consider, the fact is, a RMLO is not an underwriter and it is not the requirement of a lender to employ a RMLO if that lender is exempt from origination requirements.
Read that again, might read it several times. If you are exempt from origination requirements and you make a seller financed loan you are a lender, not an originator under the D-F Act. The Act puts the responsibility of applying the ability to pay rules on the lender, not the originator (except that if an originator is involved, they are required to act as they were trained to originate a mortgage).
So, if you are an exempt lender, it looks like you have two options, seek out a RMLO to assist you, or, learn how to originate a loan......and that isn't hard to follow the origination process. If you are to learn, you better learn it the right way because you have a great deal at stake if you mess it up, even with one loan! I'm not suggesting that any lender doesn't seek assistance either.
If a borrower is not properly qualified, they have 3 years to cry foul and they get all of their money back, you could be fined on top of that!
So, the investors running around doing one or two deals, dreaming up whatever thinking they are totally exempt from the D-F Act, they are not exempt from any lender requirements, simply the origination requirements of licensing.
How do you get around Dodd-Frank? Easy, don't do any financing, not even one loan, if you do a loan, then comply with the lender requirements. There are also other methods to facilitate the full transfer of title in the future after receiving the purchase price.
Sorry, too many irons in the fire, if anyone wants to help, please let me know! :)
- Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes10y
Here you go!
Title XIV
https://www.cfpbmonitor.com/wp-content/uploads/sit...
SEC. 1401. DEFINITIONS.
Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is amended by adding at the end the following new subsection:
‘‘(cc) DEFINITIONS
RELATING TO MORTGAGE ORIGINATION AND RESIDENTIAL MORTGAGE LOANS
.—
‘‘(1) COMMISSION
.—Unless otherwise specified, the term
‘Commission’ means the Federal Trade Commission.
‘‘(2) MORTGAGE ORIGINATOR
.—The term ‘mortgage originator’—
‘‘(A) means any person who, for direct or indirect compensation or gain, or in the expectation of direct or indirect compensation or gain—
‘‘(i) takes a residential mortgage loan application;
‘‘(ii) assists a consumer in obtaining or applying to obtain a residential mortgage loan; or
‘‘(iii) offers or negotiates terms of a residential mortgage loan;
‘‘(B) includes any person who represents to the public, through advertising or other means of communicating or providing information (including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items), that such person can or will provide any of the services or perform any of the activities described in subparagraph (A);
‘‘(C) does not include any person who is (i) not otherwise described in subparagraph (A) or (B) and who performs purely administrative or clerical tasks on behalf of a person who is described in any such subparagraph, or (ii) an employee of a retailer of manufactured homes who is not described in clause (i) or (iii) of subparagraph (A) and who does not advise a consumer on loan terms (including rates, fees, and other costs);
‘‘(D) does not include a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with applicable State law, unless such person or entity is compensated by a lender,a mortgage broker, or other mortgage originator or by any agent of such lender, mortgage broker, or other mortgage originator;
‘‘(E) does not include, with respect to a residential mortgage loan, a person, estate, or trust that provides mortgage financing for the sale of 3 properties in any 12-month period to purchasers of such properties, each of which is owned by such person, estate, or trust and serves as security for the loan, provided that such loan—
‘‘(i) is not made by a person, estate, or trust that has constructed, or acted as a contractor for the construction of, a residence on the property in the ordinary course of business of such person, estate, or trust;
‘‘(ii) is fully amortizing;
VerDate Nov 24 2008 22:28 Sep 03, 2010 Jkt 089139 PO 00203 Frm 00763 Fmt 6580 Sfmt 6581 E:\PUBLAW\PUBL203.111 PUBL203
anorris on DSK5R6SHH1PROD with PUBLIC LAWS 5 124 STAT. 2138 PUBLIC LAW 111–203—JULY 21, 2010
‘‘(iii) is with respect to a sale for which the seller determines in good faith and documents that the buyer has a reasonable ability to repay the loan;
‘‘(iv) has a fixed rate or an adjustable rate that is adjustable after 5 or more years, subject to reasonable annual and lifetime limitations on interest rate increases; and
‘‘(v) meets any other criteria the Board may prescribe;
‘‘(F) does not include the creditor (except the creditor in a table-funded transaction) under paragraph (1), (2),or (4) of section 129B(c); and
‘‘(G) does not include a servicer or servicer employees, agents and contractors, including but not limited to those who offer or negotiate terms of a residential mortgage loan for purposes of renegotiating, modifying, replacing and subordinating principal of existing mortgages where borrowers are behind in their payments, in default or have a reasonable likelihood of being in default or falling behind.
‘‘(3) NATIONWIDE MORTGAGE LICENSING SYSTEM AND REGISTRY
.—The term ‘Nationwide Mortgage Licensing System and Registry’ has the same meaning as in the Secure and Fair Enforcement for Mortgage Licensing Act of 2008.
‘‘(4) OTHER DEFINITIONS RELATING TO MORTGAGE ORIGINATOR
.—For purposes of this subsection, a person ‘assists a consumer in obtaining or applying to obtain a residential mortgage loan’ by, among other things, advising on residential mortgage loan terms (including rates, fees, and other costs), preparing residential mortgage loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan.
‘‘(5) RESIDENTIAL MORTGAGE LOAN
.—The term ‘residential mortgage loan’ means any consumer credit transaction that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or on residential real property that includes a dwelling, other than a consumer credit transaction under an open end credit plan or, for purposes of sections 129B and 129C and section 128(a) (16), (17),(18), and (19), and sections 128(f) and 130(k), and any regulations promulgated thereunder, an extension of credit relatingto a plan described in section 101(53D) of title 11, United States Code.
‘‘(6) SECRETARY
.—The term ‘Secretary’, when used in connection with any transaction or person involved with a residential mortgage loan, means the Secretary of Housing and Urban Development.
‘‘(7) SERVICER
.—The term ‘servicer’ has the same meaning as in section 6(i)(2) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605(i)(2)).’’.
- 10yNate T.Pro MemberInvestor · Tempe, AZ · Member since 2014 · 142 posts · 73 votes
Thanks @Brian Gibbons and @Bill Gulley!
I am not interested in being exempt. I have used a licensed originator for the seller financed loans I've done. I'm just trying to understand the rules, which seems pretty difficult at this point.
I am considering getting a mortgage license to be able to process my own seller financed loans. Good idea? Bad idea?
I'm also interested in finding out more about the TIC solution that you mentioned in another thread (Bill). Is there somewhere I can find out more details on that?
- Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes10y
Yes @Bill Gulley
The TIC Solution!
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes10y
"The TIC Solution" :)
Launching the course this week.
Another "program, method, course" is the Lock Box Lease. Basically, this is a lease agreement with a savings plan where the tenant uses the funds set aside for the purchase. It is not an installment sale, equitable interest is gained in the contract, not the property. There is no financing agreement. The lock box approach is used by non-profit housing entities in affordable housing.
You can have a Lock Box Sale, Lock Box Lease, Lock Box Option and a Lock Box TIC.
Since a sale contract, lease agreement and a TIC agreement can all require performance by the buyer, tenant or minority holder, agreements as to default and penalties can be incorporated. The seller, landlord or majority owner can have "rights of set off" under certain events, meaning the can get to the money in savings. None of these is a financing arrangement. The Lock Box Option has limitations to any set off as an option cannot require performance by the optionee (buyer), but an option price can be "set off".
All of these keeps you from getting into any financing arrangement and therefore, out of the Dodd-Frank realm.
We also must realize that when you are dealing with people, no one method will always be the best. It's a lot like finding the right car or truck that meets your needs, understanding the different options for the vehicle and selecting the options needed to build the best vehicle for you. There are many options available, you can even build a custom vehicle using the framework presented.
@Brian Gibbons think of being a "transaction engineer" :)
@Nate
@Nate T.undefined no one has to be an expert, and you won't be, experts are only need in court, an operating room or the battlefield. Just not necessary! However, today investors really need to conduct business with greater expertise based on basic real estate and financial principles.
A decade ago we didn't have the DF Act, predatory lending and dealing laws, different applications of older laws with popular methods of operations, new consumer laws as well as tax reform issues and accounting requirements.
As to your getting a mortgage originator's license, you'll have issues of self-dealing and certifying a note with you as a beneficiary, you can't really go there. No law is intended to take away any lender's loan decision authority away from them. Where you will be heading is into a mortgage brokerage operation. The methods mentioned above can keep you out of any mortgage brokerage function. Good luck! :)
- Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes10y
OK - this is how I know there's a bubble... When amateurs start posting question in a public forum about how to circumvent one of the most important federal consumer protection statutes in the land. WOW!
@Bill Gulley and @Brian Gibbons - this is your speed...LOL
Join the conversationCreate a free account to reply, vote on answers and follow this thread.