Seller Financing Under

Dodd Frank and The SAFE

Act

Who am I?

Business and Tax Strategist

Reformed CPA

Author

Real Estate Investor

Our Agenda

The REAL details of the Dodd-Frank Act that effect real estate investors AND most

importantly, how to protect yourself.

Exactly how to structure SELLER FINANCING and LEASE OPTIONS so that you're in

compliance.

The "3-Year Rule" and how to protect yourself from retroactive lawsuits.

The 'de minimus" provision that will protect you when offering SELLER FINANCING.

Seller Financing

A real estate agreement where financing

provided by the seller is included in the

purchase price.

~ Investopedia

Two Acts Now Govern Seller

Financing

Get licensed or use a

RMLO

The Dodd-Frank

Wall Street

Reform and

Consumer

Protection Act

Section 1411: Ability to Repay

no creditor may make a residential mortgage loan unless the creditor makes a reasonable and

good faith determination based on verified and

documented information that, at the time the

loan is consummated, the consumer has a

reasonable ability to repay the loan, according to

its terms, and all applicable taxes, insurance

(including mortgage guarantee insurance), and

assessments.

Ask yourself..

Does Dodd Frank (and ATR) apply to my transaction?

If so, how do I comply?

What happens if I dont?

Does Dodd Frank apply to my

transaction?

Residential and Owner

Occupied Only!

The de minimus provision

12 CFR 226.2 says a person regularly extends consumer credit if

it extended credit more than 25

times or more than 5 times for

transactions secured by a dwelling

in a 12 month period

How Do I Stay

Compliant?

Follow the rules

Bite the bullet and follow the requirements for writing the loan

and make a reasonable good faith

determination of the borrowers ability to repay

The Safe Harbor

Write only Qualified Loans

What is a Qualified Loan?

No negative amortization

No balloon payment

Must not exceed a 30 year term

Cannot have a prepayment penalty in excess of schedule to be

determined

Variable interest is allowed only under specific underwriting

guidelines

Even with a Qualified Loan

Verify income, assets and debts with 3rd party reports

Need to consider DTI ratio

Need NOT verify credit history except as it relates to DTI

8 Underwriting Factors

1. Current or reasonably expected income or

assets

2. Current employment status

3. Monthly loan payment

4. Monthly payment on any simultaneous

loans

5. Monthly payment on mortgage

related obligations

6. Alimony and child support

obligations

7. DTI ratio and residual income

8. Credit history

In addition, you must follow your internal underwriting standards that show how you

considered the 8 factors

Your standards must be reasonable and supported by data gathered over a period

of time

What happens if

dont?

Any borrower on a consumer loan secured

by real property has 3 years to bring suit

against the lender for failure to consider

the borrowers ability to repay the loan

If the suit is successful the lender must

repay all monies received in the previous

three years AND pay attorneys fees and court costs

Any time after the loan is made (3

years or not) the borrower may use

the defense of not considering

ability to pay as an off-set in any

action of foreclosure

Take Aways:

The sky is NOT falling

Investors will leave the arena

Conventional lending will remain tight for the

foreseeable future

Best advice EVER

Burning Questions????