When Dodd-Frank (“The Dodd–Frank Wall Street Reform and Consumer Protection Act”) was enacted into law on July 21, 2010, it said that you could only do three seller-carryback transactions a year, and those transactions had to meet certain requirements:
(1) The note could not have a balloon.
(2) It had to have a fixed interest rate for five years, then it could adjust.
(3) You had to prove and document the buyer’s “ability to repay” in accordance with the Qualified Mortgage Rule (QM), which is quite restrictive. That’s the same rule that banks have to use if they want a safe harbor and not get sued for making a loan that didn’t fit the QM.
The Consumer Financial Protection Bureau (CFPB), which was writing the regulations to implement Dodd-Frank, asked for public comments. I told Bill Mencarow about this, and he immediately (and repeatedly) alerted PAPER SOURCE JOURNAL subscribers and everyone else he could think of, urging them to submit their comments.
I also alerted members of Congress and got the National Association of Realtors on board and helped them write their comments to the CFPB.
Because so many people wrote comments to the CFPB —- and THE PAPER SOURCE took the lead — the bureau relaxed the seller financing restrictions. They came out with something that was a lot more relaxed than the Dodd-Frank law was originally.
The CFPB subsequently issued the following regulations.
These apply to seller carryback notes created on or after January 1, 2014.
THE ONE PER YEAR CATEGORY
The CFPB broke seller financing into two different categories. One category is for those individuals, trusts or estates who do just one seller-carryback transaction a year on a property that has a dwelling that the buyer will use as their primary residence.
Let me repeat that, because there has been so much misinformation circulated about it….
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