In my November 2012 blog, I wrote about the end of creative Seller Financing as a result of the Dodd Frank Act amendments.
Read about it here: http://everythingscottsdalephoenixrealestate.blogspot.com/2012/11/really-end-of-creative-seller-financing.html
2 New BIG Rules Of Seller Financing - AKA Seller Carryback
Although many commentators and trade associations say that any sellers doing carry back financing start now to comply with the requirements of the Dodd-Frank Act, the requirements have been postponed until January, 2014.
Furthermore, on January 20th, the Consumer Financial Protection Bureau ("CFPB") provided some much needed clarity on seller carry back financing under Regulation Z of the Truth In Lending Act ("TILA").
According to the new rules, a seller can finance a purchase and will not be considered a "loan originator" under the act as long as one of two provisions applies.
For the sale of three or fewer properties in a 12 month period and provides that a person is not a loan originator if:
1. The person provides seller financing for the sale of three or fewer properties in any 12 month period to purchasers of such properties, each of which is owned by the person and serves as security for the financing,
2. The person has not constructed or acted as a contractor for the construction of, a residence on the property in the ordinary course of business of the person,
3. The person provides seller financing that meets the following requirements:
a. The financing is fully amortizing,
b. The financing is one that the person determines in good faith the consumer has a reasonable ability to repay, and
c. The financing has a fixed rate or an adjustable rate that is adjustable after five or more years, subject to reasonable annual and lifetime limitations on interest rate increased. If the financing agreement has an adjustable rate, the rate is determined by the addition of a margin to an index rate and is subject to reasonable rate adjustment limitations.
This is an exemption for only one property, but does not expressly prohibit a balloon payment. The act provides that a person is not a loan originator if:
1. The person, provides seller financing for the sale of only one property in any 12-month period to purchasers of such property, which is owned by the natural person, estate or trust and serves as security for the financing,
2. The person, estate, or trust has not constructed , or acted as a contractor for the construction of, a residence on the property in the ordinary course of business of the person,
3. The person, estate or trust provides seller financing that meets the following requirements:
a. The financing has a repayment schedule that does not result in negative amortization,
b. The financing has a fixed rate or an adjustable rate that is adjustable after five or more years.
For more information, please feel free to review the following: http://combslawgroup.com/nscbf/
Richard Bazinet - Realty ONE Group - Phoenix Scottsdale Real Estate