*Update on HUD SAFE Mortgage Act

I’m fighting mad!

Hey!   I’ve got new information for you on the HUD SAFE Mortgage Act.  Word has been going around that some states have successfully circumvented the proposed HUD rule that would require all sellers who offer seller financing on non-owner occupied properties to obtain a loan originator’s license  (unless they are an attorney or licensed real estate agent).  This is not true!  States cannot supersede HUD’s Proposed Rules!

Here’s what I got direct from HUD today:

“HUD will determine the minimum standards for SAFE compliance once the comments are reviewed and decisions made.  States cannot exempt individuals that HUD determines must be licensed but can require additional categories be licensed.”

That means that states cannot supersede HUD by passing their own legislation.  In other words, it is absolutely critical that we stop this at the source by continuing to flood HUD with comments objecting to this blatant violation of our property rights.

These new HUD Proposed Rules would force real estate investors to be licensed in order to offer seller-financing on their non-owner occupied properties.

As experts in this industry, we must speak up and let HUD know what a drastic effect this will have on real estate investors and potential home buyers across the country.  Seller Financing is playing a vital role in turning this housing market around—we can’t let them take it away!

As of today, over 1800 comments are posted on the HUD site.  We’ve got to keep them coming before the March 5th deadline.

If you’ve already posted your comment, please forward this email to others requesting that they do the same.

Please take 10 minutes right NOW and post your objection on the HUD website.  Just click the  link below for direct access.   If you don’t know what to say, scroll down and see the samples that I created for you.   You can use them verbatim or tweak around to suit yourself.  For your convenience, I’ve also included a synopsis of the Proposed Rules below.

CLICK HERE TO SUBMIT YOUR COMMENT TO HUD

TO READ THE PROPOSED RULES in detail (not recommended—they are very lengthy and cumbersome):

1)      Go to www.regulations.gov .

2)      Use the Document Type drop down box to select “PROPOSED RULES”;  under Keyword, enter “SAFE MORTGAGE”; press “SEARCH.”

3)      Under results, click on  “FR-5271-P-01 Safe Mortgage Licensing Act: HUD Responsibilities…”   (It will probably be the first result.)

For your convenience, I’ve written up a brief summary below.

TO VIEW OTHER PEOPLE’S COMMENTS: Follow the above directions, then click on “Open Document Folder” in the far right hand column on the www.regulations.gov  site.

TO VIEW YOUR OWN COMMENT: just search for your own name.

WHAT SHOULD YOU SAY?

Be polite and to the point.  Basically, you want to request that the definitions in the Proposed Rules be changed to allow private individuals to originate loans on properties they personally own whether or not they live in the property and whether they hold title in their own name or another entity (such as an LLC, corporation or trust). Let them know how devastating this will be to you and to the industry.   Here are some ideas:

• Seller financing is an “age old” tradition based on the principle that all owners should have the right to sell their property.
• Seller financing is sometimes the only way a person can sell their property.
• Seller financing is sometimes the only way a person can BUY a property.
• Many people do not qualify for bank loans under today’s strict guidelines.
• Bank loans are not even available on certain types of properties.
• The proposed rules would prohibit even partial seller financing  such as a second mortgage.
• According to HUD’s “Residential Finance Survey” in 2001, roughly 40% of all non-farm residential properties in the US are owned free and clear, and are therefore perfect candidates for Seller Financing.
• Many innocent people could suffer financial devastation if they were prohibited from using seller-financing to quickly sell their properties if necessary:
  • An estimated 6 million Americans own a property other than their own primary residence.
  • An estimated 4.5% of Americans own three or more properties, many purchased solely as investment properties.
  • 40% of non-owner occupied residences are mobile homes which are more difficult to sell with bank financing.
  • Approximately 5% of homes in US are for sale or for lease;  seller financing may be key to liquidating this inventory.

SAMPLE COMMENTS FOR YOU TO USE

If you don’t know what to say or don’t have time to put your thoughts together, below are a couple of  examples.  Pick the one that suits you best, then just cut and paste it into the comment box on the www.regulations.gov site.   You can tweak it around to make it fit your situation before you click “submit.“    I can’t make it any easier than that!

* * * * * * * * * *

Please amend the Proposed Rules to allow individuals to originate loans without a license on properties they personally own (1) whether or not they lived in the property and (2) whether they hold title in their own name or another entity, such as a limited liability company, a corporation, or trust.

I have been a real estate investor for many years.  I have always sold my properties with seller financing.  It is the perfect way for me to keep my money invested in my properties without me having to deal with the headaches of owning the property.   More importantly, it allows me to help families experience the joy of owning a home, especially when today’s strict guidelines preclude so many good borrowers from getting a loan.

I am not physically or financially able to take the courses and meet the criteria for obtaining a loan originator’s license. These Proposed Rules would be devastating to me and my real estate business.    If I were not able to offer seller financing, I would lose the opportunity to sell my properties to good people, just because banks won’t loan them money.

This is a major violation of my rights as a property owner.  I should be able to sell my own property to whomever I want without the undue hardship of having to obtain a license.

Please do not put these kinds of restrictions on seller financing.   We all need seller financing.   It is good for the seller, good for the buyer, and good for the housing industry and our economy.

I urge you to allow property owners to offer seller financing on non-owner occupied properties without having to obtain a license.

* * * * * * * * * *

I am writing to urge you to change the Proposed Rules to allow real estate investors to offer seller financing on their non-owner occupied properties, without having the undue hardship of obtaining a loan originator’s license.  This is grossly unfair to property owners and a terrible violation of their rights.

Seller financing has been a god-send for many people nationwide.  It allows distressed property owners to sell their properties quickly without losing buyer after buyer, all because the banks have decided they don’t qualify for a loan.  As a property owner, I should be able to sell my property when I want and to whomever I want—without having to go through the stringent licensing requirements that you are proposing.

Seller financing is a wonderful alternative for good buyers who are rejected by banks because of the bank’s own strict guidelines.  Without seller financing, many good families would not be able to own a home.  Even the government has recognized the importance of  seller financing by allowing the use of the First Time Home Buyer Credit on seller financed properties.

The mortgage meltdown that we have experienced over the past two years is not from seller-financing.  It is from within the mortgage industry.   Don’t punish real estate investors and innocent home buyers by imposing these strict requirements that should be reserved for the mortgage industry.

Please change these Proposed Rules to allow property owners to offer seller financing without having to obtain a license, whether they have lived in the property or not.

* * * * * * * * * *

SUMMARY OF THE PROPOSED RULES:

The Proposed Rules are very long and cumbersome.  Below is a list of the loosely interpreted key points that most real estate investors and note buyers may be interested in knowing.   I must add this disclaimer:   I AM NOT AN ATTORNEY.  Do NOT use this synopsis to determine if you are in compliance or not.  If you are engaged in originating or modifying loans, consult your own attorney for a legal interpretation of these rules for your particular situation.

1.   What is this?

The Secure and Fair Enforcement Mortgage Licensing Act of 2008 (SAFE Act) was enacted into law on July 30, 2008 as part of the Housing and Economic Recovery Act of 2008.   If individual states fail to enact their own laws to meet the minimum requirements of the SAFE Act, then these HUD Proposed Rules will govern licensing loan originators in those states.   States cannot exempt individuals that HUD determines must be licensed.

2. Who does it apply to?

The Proposed Rules require that anyone who is originating and/or modifying residential loans must obtain a license, except for:

• Individuals who carry back a mortgage secured by a property that served as their own residence (You would need a license to offer seller financing when wholesaling a property or selling one of your rentals!)

• An individual who is negotiating terms of a loan on behalf of a family member
• A licensed real estate broker
• An attorney (with restrictions)
• A bank
• Someone only extending credit for timeshare plans
• A clerical person or underwriter operating under the direction of an individual who is properly licensed under the Proposed Rules
• An employee of a bank who is registered with and maintains a unique identifier through the Nationwide Mortgage Licensing System and Registry

3. What do I need to do to get licensed?

Obtaining a license under the Proposed Rules involves:

• A background check; credit report; finger printing; administrative, civil, or criminal findings by any governmental institution
• No felony convictions within preceding 7 years, some felony convictions prohibited completely
• 20 hours of approved education
• Pass a written test
• Submit Mortgage Call reports detailing your lending activity
• Be under the authority of a State Loan Originator Supervisory Authority

Thanks for all of your comments, but most of all thanks for standing united on this urgent issue!

Do NOT  voice your opinion to HUD by clicking “Comments” below this post.   That is just for commenting on my blog!   HUD will not see it .   Follow the directions in red above.  (Not that I don’t love getting comments on my blog!)

Have a wonderful day!

—Donna

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Tags: HUD, loan origination license, loan originator license, seller finance, Seller Financing

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