Do You Feel SAFE Now? The Fair Mortgage Act Not So Fair For Owner Financing

Well, those regulators should feel proud of themselves… do you think they just have to make it look like they’re justifying a paycheck or something?

Perhaps there is some good that will come out of the SAFE Mortgage Licensing Act, but the inclusion of owner financing in an effort to clean up all the hooyah that the big banking systems and Wall street created themselves is probably one of the most harmful attacks on the real estate industry I’ve seen.

All you buyers out there who can’t get a loan? Your government just made it a whole helluva lot harder for a seller to offer you financing so you can enjoy home ownership. Nice.

[Agents... you just lost out on some hard-won commissions. There are many agents who have businesses largely involved in dealing with owner financing. Call and thank NAR for helping you out. As far as I know, they did nothing to remove owner financing from the legislation... are there heavy mortgage interests whispering in their pocketbooks, or is there something else I don't know?]

According to the regulation, if you’re an investor, you can’t sell your own residential properties (1-4 units) and offer terms to take advantage of IRC 453 (installment sale) unless you get a mortgage originator’s license. You can’t even get around it by hiring one to negotiate it for you (although I hear that lobby efforts have rallied this concession in Texas).

Isn’t this a nice attack on personal property rights?

This supposedly applies to you even if you’re not in the business of buying lots of properties and turning them around with owner financing like a lot of the guys buying REOs and short sales by the dozens.

You may only own one duplex, or you may be liquidating your family’s estate upon the death of your parents…

If the property is not your primary residence, or you are not selling to a family member, you have to have a license to sell your property with owner financing (but I guess you could get your attorney to negotiate the terms for you, as long as he’s not being paid by a licensed mortgage originator… heck, here’s what we do: have the attorney pay the LMO or note professional to negotiate the terms of the loan to make sure the paper will sell for the highest possible price in the secondary market!!!).

I can’t imagine that this is enforceable or that it would stand up in court. Going back to this: SAFE Mortgage Licensing Act… there seems to be a distinction between those engaged in a ‘commercial context’ and those who aren’t.

So, based on the perceived intent, it’s probably fair to say that it might be ‘safe’ to sell your own portfolio of properties (as long as you did it legally and ethically – and if you did it intelligently, you could even sell the paper down the road!). Or go the extra mile and have a licensed mortgage originator process the paperwork and put together all the Truth in Lending and other standard docs for your buyer.

If you’re in the business of buying and carrying on your properties, seems like there’s no way around needing to get a license. Hogwash. Pure hogwash. And I didn’t even grow up on a farm.

My take…

When you’re selling a residential investment property that you own and you want or need to offer terms to get a fair price, and/or defer capital gains, here’s what you could do…

just do it, business as usual (some people in the business are so convinced that it’s unconstitutional to restrict this basic right, that they’re not giving the whole conversation a lot of thought or concern… they’re just ethically putting their deals together for their investors and the grateful home owners that come to them)
hire a Licensed Mortgage Originator to negotiate and produce all the typical disclosures for the buyer – complies with the intent, if not the letter of the law (if they got this to fly in Texas, then it’s likely a precedent that will be followed). Ideally, this LMO understands the secondary trust deed market so they know how to craft a note that can be sold for the highest possible price (I’m in the process of getting my license in CA… what are the rest of you doing out there?).
I like my attorney play… that was kind of an accidental thought, but I think it could be a good one
get yourself licensed
use a Title Holding (Land) Trust instead (all the benefits without the risks of carrying paper – you just don’t have a note to sell)

I think the main intent of the regulation is protect homeowners from being taken advantage of when they’re buying a home to live in for themselves and their families. Investors buying with owner financing would probably be considered to be savvy enough to take care of themselves, just my opinion.

So, if you want to play it super safe, just use the Title Holding Trust when selling residential properties on terms.

If you’re an agent, you can do all your regular listing and sales activities on residential properties offering owner financing as long as the seller is licensed – (yeah, right) – you just can’t be involved in negotiating the terms… (which might not be a bad thing because agents don’t tend to know about crafting healthy notes for the secondary market).

For me, there is so much work to be done with:

the sellers of high-end primary residences, and
commercial properties, and
small business owners,

that there’s no way we’re going to run out of business.

I’d love to hear your thoughts… drop me a comment down below!

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Helicopter License Financial Aid

Getting a private license or commercial license is not a cheep endeavor. For many people it very possibly could be one of the many important reasons why they haven’t tried to get their helicopter license yet. Alas, the costs getting a helicopter license are only going up as this is an high priced hobby (or career). But do not be irritated! There are several options that you should explore to receive financial aid for your training.

Fortunately, there are several choices for you to take which will allow you to afford the helicopter training you need. There are a number of groups, financing and scholarships available that will sponsor you and the expenditures needed to get a helicopter license.

Listed below are quite a few sources which will help you financially:

- Nearby flight groups
- AOPA Pilot Finance – run along with MBNA Bank, and offers personal loans to be used for any flight training expense. For more information, visit the aopa website or call 1 800 882 8648.
- Pilot Finance – This loan type can be used to finance part time training (1-5 lessons per week). For more information, visit the pilot finance website or call 1 800 667 0201.
- Reserve Officers Training Corps (ROTC)The University Aviation Association (UAA) and -the Aircraft Electronics Association (AEA) – both of these groups are nationally certified
- Local Boy Scouts of America (of the their merit badges is in aviation and successful alumni may be willing to sponsor aspiring pilots)
- Helicopter Foundation International
- United States Air Force and The Air Force Aid Society
- Whirly Girls International (an organization that gives grants and loans to female students)
- Pell Grants, Federal Supplemental Educational Opportunity Grants (FESOG)
- The Women in Aviation International (an organization that provides grants and loans to female students)

In addition to the establishments above, there are various groups and clubs that offer scholarships to students and members. Having said that, the majority of scholarships commonly are not very well promoted. If you want to know about learning more about scholarships and helicopter financial aid options that may be available to you, the avscholarship website is very helpful.

Listed below are the general requirements for some aviation scholarships:

US Citizen
Full-time Student
Demonstrate financial aid need
Minimum Grade Point Average
College degree is an aviation related career

Remember to talk with your nearby flight school about financial aid options that they may supply. Frequently they will have different alternatives of payment that you can discuss about.

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Owner Builder Financing Without A Contractor’s License

So you’ve done some research on owner builder financing… Maybe you’ve called you’re local bank and said, “I want to build my own home, I need owner builder financing.”, and they basically said, “Good luck finding that!” Well, loans for owner builders do still exist and you don’t need a background in home building to get financing.

You’ll find that some lenders call a program that they have, an owner builder financing program, only to find out that what it really means is that they will let you build your own home if you’re a General Contractor. That’s still great for those with Contractor’s licenses, but what about your average working family with no experience and no license? Most banks require you to have a license or require an approved/preferred site supervisor. Some require an approved builder. What do you do if you want to build your own home, but don’t want to use a builder or site supervisor. Read on.

The internet is a great tool to start searching to see what your options are when you’ve been turned down for owner builder financing locally, so for that I applaud you for finding this article.

Owner builder financing is slowly becoming harder and harder to find mainly because of the current state of the mortgage industry. With all of the foreclosures being filed all across the country, lender guidelines are becoming tougher to meet. Stated income and no doc programs are nearly gone, although there are a hand full of lenders who will still fund them with limited to no documentation to good borrowers. With guidelines stiffening, large lenders are shifting towards A paper loans with very little risk, especially when it comes to owner builder loans. But, this doesn’t mean that every lender has stopped lending money to owner builders, it’s just harder to locate one that will.

Every month, hundreds, if not thousands, of people are looking to the internet to locate and owner builder financing company, but there are a few to be found by searching alone. And, if you do find one, there’s a chance that they do not lend in your state. So, what do you do?

Well, credit unions enjoy funding owner builder loans, it’s just a matter of finding one that can help you in your local area. They usually have great terms for their owner builder financing programs and understand that type of construction loan. Otherwise, your other option is to locate an owner builder consulting company who has probably done all the research for you who can help you with the financing through one of their lenders. A plus to using an owner builder company is that, for a small fee, you can obtain better terms on your loan, like 100% financing for land, all materials, and labor. The reason, because of their involvement, either as a site supervisor or remote consultant, your success as an owner builder increases, therefore it’s less risk for the bank.

One thing to watch out for, are owner builder companies who charge outrageous fees. Some owner builder consulting companies charge such a ridiculously high fee that hiring a General Contractor would have cost you the same.

One excellent program for owner builder financing is construction to permanent loan, this is one loan for the land, construction, and permanent mortgage once your home is complete. This is the best type of loan available for your average size home. You have one set of closing costs for what is traditionally three loans. It works like a normal construction loan, but once you reach completion of your home, it is modified to a permanent mortgage, such as a 30 year fixed, a 15 year fixed, or some type of ARM loan.

Owner Builder Financing Rates

Construction loan rates for owner builders is not terribly insane. People are concerned about paying a high interest rate during construction and should be, but the truth is, construction loan rates are not that bad. The bank is taking a huge risk on you upfront, so to be able to build your home for less than 8.5% during construction would still be a great deal, but the truth is, rates can be even lower than this. Of course after the construction period and you modify to a permanent mortgage, rates should be in the ballpark of what market rates are at that time. There are some loan programs that allow you to lock in your permanent rate before you even start construction.

For owner builder financing approval, you are basically qualifying for the end loan, this is what makes the construction loan possible. Although, if your construction loan term goes over the set 6, 9, 12 month period, whatever is designated by the lender, you may need to be approved again for the end loan.

Construction interest can be paid during construction or some programs allow your construction interest to come out of your construction loan during your build. However, if you do have to pay interest during your construction loan period, you will only be paying interest on the amount that you have currently drawn on. For instance, if you have just closed, you are only paying interest on the amount that was paid by the bank for the land. As you build and draw additional funds for the project, your interest payments will increase. This is a great incentive to make sure that the construction of your home is going as planned and that the project is always moving right along.

Owner builder financing is still available and is not going away any time soon. As long as lenders scrutinize each project so they limit their risks, owner builder financing programs should be around for some time to come.

Why? When you apply for a construction loan, you are budgeting that you can build your house for 85% of what it will be worth, depending on the lenders guidelines. This means that if your home will be worth $100,000 at the end of construction, you should be able to build it for $85,000. Some lenders are tighter on these rules and require that number to be higher or lower, but for the most part, you are required to qualify under ‘future appraised value’ or ‘cost to build’.

Soft Market Areas

In this day and age, there are areas that are designated as soft market areas due to the rate in decline of house values within a certain county, geographical location to a declining area, or zip code. What does this mean for you? Well, if you plan to build in a soft market area, you will be required to bring some money to the closing table either in the form of cash or equity in the land you already own. Most lenders require a down payment of 10% upon closing if you plan on building in a soft market. Some lenders require 20% down. Owner builder financing is still available in these areas, but a down payment is needed.

Owner builder financing is available and can be located either locally or through a nationwide lender to build your own home without having to carry a contractors license.

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Proposed HUD Rule Prohibits Seller – Financing Without Licence Except For Family Or Own Residence

“The Secure and Fair Enforcement Mortgage Licensing Act of 2008 (SAFE Act), as a key component of the Housing and Economic Recovery Act of 2008 (Pub.L.110-289) enacted into law on July 30, 2008, directs all States to adopt licensing and registration systems for loan originators that comply with the minimum standards set by the SAFE Act. The Department of Housing and Urban Development (HUD) is charged by the SAFE Act with establishing and implementing a system for mortgage loan originators in States that do not meet the minimum requirements of the statute. So, HUD published its proposed Rule on the minimum standards under the SAFE ACT that States need to comply with in licensing loan originators, procedures and actions, as well as its enforcement authority in the Federal Register, Vol. 74, No. 239, December 15, 2009. Moreover, HUD proposes “to clarify or interpret certain statutory provisions that pertain to the scope of the SAFE Act licensing requirements, and other requirements that pertain to the implementation, oversight, and enforcement responsibilities of the States.”

The HUD proposed Rule, if codified as a Final Rule or regulation, would eliminate the business strategy of acquiring and reselling properties through seller financing without being licensed as a loan originator, unless: (1.) an individual offers or negotiates terms of a residential mortgage loan with or on behalf of a member of his or her immediate family; or (2.) an individual seller provides financing to a buyer pursuant to the sale of the seller’s own residence.

Proposed Rule Prohibiting Seller Financing Deprives Owners Of Property Rights Under The 14TH Amendment:

One of the cherished rights of U.S. citizens is property rights protected by the 14th Amendment of the Constitution from any state action without due process of law, which allows owners to dispose of their properties in any way they see fit.

One of their property rights is to sell their properties through seller financing to assist buyers who cannot qualify for bank loans. The usury provision (Article 15) of the California Constitution prohibits loan-shaking activities, charging in excess of 10 percent per annum, unless exempted by a finance lender’s license. Requiring owners of residential income properties to be licensed as loan originators in order to sell such properties through seller-financing directly to buyers interferes with property rights of owners.

The proposed Rule seeks to eliminate property rights exercised by property owners through centuries in favor of more regulations and of banks at the expense of home buyers with bad credit.

Proposed Rule Impairs Obligations Of Existing Contracts Protected By The Constitution:

The contract is the law among the parties. A property owner has the right to sell his or her property, including seller-financing to enable a buyer short on cash to consummate the sale.

Seller-financing likewise enables a seller to sell his or her properties faster, and earn income during the duration of the promissory note being financed.

The proposed Rule would impair obligations of existing contracts in cases involving contracts to sell with seller-financing, lease with option to buy with seller-financing, and other similar contracts.

Proposed Rule ยง3400.13 Requires Individuals To Be Licensed By States With Exemptions:

3400.13(e) of the proposed Rule provides that a State is not required to impose the prohibitions: (a) from “engaging in the business of a loan originator with respect to any dwelling or residential real estate in the State, unless the individual first registers and obtains and maintains a valid loan originators license for the State; and (d) complies with the same requirements in the case of an independent contracts engaging in residential mortgage loan origination, if: “(4) an individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of the individual; and (5) any individual who only offers or negotiates terms of a residential mortgage loan secured by a dwelling that served as the individual’s residence.”….(underscoring supplied)

Loopholes To Proposed Rule:

A loophole to the proposed Rule is for the seller, who is amenable to seller financing of a residential income property, to hire the services of a licensed loan originator to offer or negotiate terms of a residential mortgage loan to a prospective buyer.

Another loophole is to retain “a licensed attorney who only negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney’s representation of the client,” and who is not “compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent” thereof, pursuant to 3400.13(e)(6) of the proposed Rule.

Conclusion:

The proposed Rule, prohibiting seller-financing without loan originator license except for family or one’s own residence, should not be codified into regulation because it deprives owners of their property rights to indulge in seller-financing, and it impairs obligations of existing contracts.

If it is found to be within the constitutional rule-making power of the Congress delegated to HUD, and not an over-reaching regulation beyond the scope of the SAFE Act, the loopholes of hiring a licensed loan originator or licensed attorney are available to owners willing to do seller-financing.

Atty Roman P. Mosqueda is a graduate from Michigan Law School with both a Doctorate of Law and LLM. The Law Offices of Roman P. Mosqueda are a full service law firm that handles all types of cases such as divorce, immigration, bankruptcy, personal injury, and more. Call (213) 252 – 9481 for a free consultation today!

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Debt Consolidation Finance – Licensing of Debt Driving out

Financing, as debt consolidation finance is the simplest and most uncomplicated way of dealing with various debts. The idea is that one takes out another loan which is large enough to pay off all your debts such as credit cards, personal loans, business loans, medical loans, overdrafts and other loans. Debt consolidation finance leaves individuals with one single monthly repayment to make, which is already a great step forward in making ones finances easier to control.

Surely that the financing takes out at a comparatively low interest rate, one should find that ones total monthly repayment is lower than it was when one was servicing many smaller loans, with more expensive debts. Also, choosing a longer term to repay ones financing will lower the costs even more.

The debt consolidation finance works as mediator between various lenders and a borrower. For, there are scores of lenders available online and offline for this debt consolidation finance, with their respective policies and plans, these lenders provide two modes of availing this debt management financing plan. In one of these plans, collateral pledging is an essential part of the mode, whereas another plan requires nothing as of borrowers’ security.

More so, those individuals who are hit by the adversity of bad credit history too, can avail the facility of debt consolidation finance. Lenders keep no financial distinction on providing this debt management financing program. Such individuals only may have to pass by some tardy official works, due to their unwilling adverse credit history. No matter, owing to stiff competition amongst lenders in the money market, borrowers get many other chances of getting these loans instantly with quick approval.

Advisably, before signing up with a finance company for debt consolidation finance, individuals will take over the servicing of their debts in return for fee. Instead of having to keep up with all ones repayments to many creditors, one can now make a single payment to the management or financing company who will divide it between. This in itself can be a great weight off your mind, as the stress of keeping track of your repayments in removed, but debt consolidation finance can offer more than this. And, it can work as licence for driving out debt devils.

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