The Dodd-Frank bill affects any private lending taking place after January 1, 2014. The initial rules for seller financing have been modified.
If the buyer uses the property as their personal residence and the seller only does one seller finance per year then the rules are:
1) There must be a fixed interest rate for five years. After that, the interest rate can increase up to two points per year for a maximum of six percentage points.
2) There can be a balloon payment in the note.
3) The seller is not required to verify the buyer's ability to pay.
The selling entity can be an individual, an estate or trust. It cannot be a partnership, LLC, Corporation or other legal entities. Notice, that is one entity per trust, per year.
If the same person trust or estate does more than one seller financing per year then:
1) The same interest rate rules apply.
2) A balloon payment is not allowed.
3) the seller must verify the borrowers ability to pay.
I've been following the development of the Dodd Frank rules for years and have used those guidelines. We also give a full Truth-in-Lending disclosure. We also deliver many other documents, over 20 items, including a title report, termite report, property defect disclosure report, and buyers inspection reports. Since we do financing through land trust procedures, we have an explanation of the rules and procedures with trust beneficial interests. The buyers become the 100% owner of the beneficial interest and assign it back to the lender as security for the loan. All UCC-1 documents procedures are followed. This makes a foreclosure faster and less expensive if it is ever required.
There are many potential buyers for seller financed property who are unable to qualify for a bank loan due to foreclosure, bankruptcy or other financial problems. They typically pay above market price for the house, above market interest rates, and are required to put 10% to 20% cash down payments. Monthly payment including taxes and insurance is structured to be close to market rent. They are happy buyers and have an excellent payment history on their new home.
The Dodd Frank bill should have very little negative effect on seller financing. As you can see, the rule for one transaction per trust will not affect any investor that uses land trusts for holding title to investment real estate. It is the best method of owning real estate. You can learn everything about land trusts, personal property trusts and other tools such as options, IRAs and 1031 exchanges at the 'TRUST Creation and Application Seminar' in Jackson Mississippi January 23-25, 2014. More information is on my website at www.JackShearealestate.com
Jack,
your email is very striking and I do appreciate it very much. I have utilized options and typically a put a growth rate in the option during the term of the option. Doing this without transferring title doing this without releasing or relinquishing title to the buyers and tell they actually exercise the option.
Many times and states with sales taxes and there are a few around me that I’ve sold in I’ve always utilized an option and it has enhanced my ability to retain title retain right off and give the seller what they ultimately want.
I only thank God that I like yourself and Pete and am at the point in my life where I’ve got enough and I am truly an Ender, and damn proud to be :-).
I know that you’ve done some private money lending and I am still doing that here in Oregon and in Washington. They started their ruffled the feathers on me a couple of years ago and, I too could path that was a little bit different, I myself had my attorney answer the questions and ask some questions on my own behalf I got a letter of determination that we ordered and requested from the state. Getting in finding their final determination of where they rated me.
I gave them a few qualifications and told them of at least six local attorneys and firms that I have helped and worked with cohesively to help their clients with their investments.
It was about three weeks and we received a letter back and their determination was a classified me as a mortgage banker. With that, I simply took the next step and looked for and seek out licensed loan originators by placing an open ad on craigslist. Yes there was some filtration and yes I got some offers of people wanting to do loans with me and I was always apprehensive of dealing with those people directly but telling them that I can help them if they had a licensed loan originator. After I pulled in and got about six of them doing my deals for me. Now I simply refers of realtors and the borrowers to the originators and typically what was a two-day closing has turned into perhaps a four-day closing.
Just like Peter says if you can’t do it one way you can do it another way.
Nobody bitched about the ads I put on craigslist. Because they sounded something like this.
To anyone in the mortgage industry, I have more money than brains and I need your help to help me attain a desirable end result and help me find a place to put my money. If you think you can help and if you’re a licensed as a licensed loan originator please call me and help me help someone else while helping yourself.
This did not ruffle any feathers and even today from time to time what I want to stir up business I will run an ad like that and the calls they follow, and there’s always business that follows calls.
I hope you your wife and Daniel are doing well and I don’t know if you plan to be at Pete’s seminar in California but I do plan to go to that.
I myself had a terrible car wreck and him recovering from that now and after going to surgery hospital stays and lots of pain now it looks like I’m going to therapy for probably 4 to 6 months.
The beauty and all that is my insurance company paid for everything and, now I have my auto insurance company compensating me as an investor does not have any loss of income. I know that might sound puzzling and these poor folks didn’t even understand that I been to Jack Miller’s negotiation’s classes :-).
Honestly they’re paying me about 12 bucks an hour not to do anything. And oh by the way, I am still receiving all of my income from all of my transactions during that time.
On top of the healing nine able to spend time in other people’s business more so 🙂
I want to wish you your wife and Daniel a happy new year!
Dan Butler
PS-please if you would this email private between you and I feel free to share the ideas or the concepts and have them be your own if you desire.
Dan
Jack,
Thank You for including me to your email list, I hope your seminar is a success. Joe