Proposed HUD Rules Could Negatively Impact Investors – Speak Up TODAY!

Wednesday, March 3rd, 2010 | Uncategorized

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All real estate investors need to pay careful attention to the information below and take action today. HUD guidelines propose to eliminate all seller financing unless the seller lives in the home or becomes a licensed mortgage originator. The deadline to comment on the proposed SAFE Mortgage Licensing ACT Rules is Friday, March 5, 2010. HUD will determine the minimum standards for SAFE compliance once the comments are reviewed and decisions made.

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.

The proposed rules are long and cumbersome. They would force real estate investors to be licensed in order to offer seller-financing on their non-owner occupied properties. 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, and we can’t let them take it away.

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.

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.

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.
Twenty 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.

Even the National Association of Realtors has publicly stated that this is not in the best interests of the market and encourages HUD to broaden the exemption, stating, “Sellers who occasionally provide financing for property they own should be exempt.”

Please take a few minutes NOW to voice your objection on the HUD Web site:

Go to www.regulations.gov.
Select “Proposed Rules” from the Document Type drop-down box. Under Keyword, enter “Safe Mortgage,” click on Search.
Under results, find “FR-5271-P-01 Safe Mortgage Licensing Act: HUD Responsibilities Under the SAFE Act”
Select “Submit A Comment.”

Demand 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 or 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.
Approximately 5% of homes in US are for sale or for lease; seller financing may be key to liquidating this inventory.

Sample comment (copy and paste this version, if you’d like):

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.

Log in to www.regulations.gov TODAY and make your voice heard! After you’ve done that, stay up to date on the latest happenings in the world of real estate investing…take the first step to building your short sale expertise by registering to become a Real Estate Rebel today.

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