part II: Over Reaching Legislation – Seller financing update – how smart do you need to seller finance?

From fellow Realtor Ric Thom – Property Transfer Could Hinge on IQ and Net Worth If HR 1728 Passes As Is.

On May 26, 2009 I wrote about Congress restricting owner financing and how HR 1728 limits a property owner to selling only 1 property every 36 months if offering owner financing (HR 1728, see 101 definition (3)(E). This is just one more taking from our bundle of property rights. A copy of that letter is attached below.
In response, a group in DC pointed out that you could still use owner financing if you want to sell more than 1 property in a 3 year period if you register as a mortgage originator under the act.


To register as a mortgage loan originator you have to do the following:
1. Put up a $50,000 surety bond or meet minimum net worth requirements
2. Complete 20 hours of education on federal law, state law, and mortgage products
3. Pass a test with 75% proficiency
4. Pay an application fee
5. Prove you have not been foreclosed on in the last 3 years
6. Submit to a criminal background check
7. Supply a credit report
8. Demonstrate financial responsibility
9. Prove you have no outstanding judgments
10. That you have no tax liens
11. That you have not had a seriously delinquent account within the past 3 years.
12. Satisfy annual continuing education while selling your property
13. Pay a renewal fee if your property has not sold by Dec. 31st

These requirements are listed in the Housing and Recovery Act of 2008.


So now you must pass a test to be able to transfer property. This is a slippery slope. It’s taking away our right to dispose of property as we see fit. What’s next? If you can’t pass the test you can only transfer private property every 3 years using owner financing. If you have a nonconforming property for which you cannot get conventional financing, you are in deep trouble.


So now you must prove a net worth, credit worthiness, or put up a surety bond of at least $50,000 in some states in order to sell your property. How does this help the consumer or property owner? If you have a poor credit history, you will not be able to become a mortgage originator in order to transfer your property using owner financing.


The cost of continuing education, test fees, registration fees (paid to the government), surety bond fees, etc. would be oppressive on lower income families. I’ve been told this could range from $1,500 to $2,500. All this because you own property and want to offer owner finance terms. If the value of your property is $20,000 you just paid a 10% tax.

This is a non-partisan issue. This is about the government taking and limiting our ability to transfer or dispose of our real property as we see fit as granted under the 5th Amendment of the United States Constitution.

Owner finance, also called seller finance, is not a loan. It is an installment sale. The owners agree to receive their equity in the property from the buyer over time on terms negotiated between the two of them. No points are charged by the owner. There is no loan. There is no third party lending involved.

This bill passed in the House and is in the Senate. Its intent was to create standard practices and a national registry for mortgage brokers who originate home loans for the masses. The private property owner who wants to sell their vacant land, farm, ranch, land and mobile home, residence, rental house, etc. using owner financing should not be regulated and restricted by this bill.

Ask that owner financing be exempt from HR 1728. No compromises. We pay the people we trust to represent us. Let them know this is not right. Protect our basic right to transfer property we own. You know who to write. Please pass this on.

Thank you,

Ric Thom
Security Escrow Corporation
Albuquerque, NM

Copyright 2009