Dodd-Frank Bill impacts Seller Financing
First the Safe Act had a say on it and now the Dodd Frank Act is out to sabotage Seller Financing.
The Dodd-Frank Bill would literally outlaw seller financing. The Federal Reserve, which received sweeping new authority under the Obama regulatory reauthorization, wants to effectively eliminate seller-held (a.k.a. purchase money) mortgages. It will do this by enacting a rule for the Dodd-Frank Act prohibiting property sellers from taking back a mortgage unless the buyer can qualify for conventional financing.
What’s more, MA and PA Homeowners, who create 95% of seller-held mortgages, won’t be able to qualify buyers under the same underwriting standards that banks are required to perform, and therefore the cash flow notes won’t be created.
If this is enacted it also will remove access to housing for millions of Americans, because seller financing is the only way people who can’t qualify for conventional loans can buy a house.
This rule also allows the buyer a three year right of rescission (they can cancel the sale) if the seller did not properly qualify them. This right to rescission also applies to anyone who has bought the note.
Why would the government want to slow the housing rebound further by putting stringent restrictions on seller financing – one of the few alternatives to bank financing available in today’s struggling economy…???
And it’s not over yet.
The Federal Reserve is requesting comments on the proposed rule of the ability-to-repay. NAR refers to it as Qualified Mortgage which appears on page 10 of the proposed rule.
This standard would be applied to seller financing. It’s the same underwriting standards that banks are required to perform. The bottom line is that the only people who will be able to use seller financing are the same people who would be able to qualify for conventional financing.
Comments are due before or on July 22, 2011. Please get the word out.
This is a link to the National Association of Realtors (NAR) website which summarizes the final SAFE Act rule as it pertains to seller financing and a brief update on Dodd-Frank Bill.
