We have made huge strides in raising awareness on why Congress needs to de-couple seller financing from HR 4173, and why the Senate needs to de-couple it from S 3217. These bills are designed to protect individual consumers from big companies who are misleading the public. The current language endangers the very consumers it seeks to protect.
You can help enlighten Washington by calling, emailing and writing to your Senators and Congressional Representatives. If enough Americans raise their voices before these bills find a co-sponsor then it is possible that an amendment can correct a great injustice before it is voted into law.
I’ve received many questions asking, “Augie, I want to help but don’t know what to say!” Below you will find a letter template that you can copy and paste into an email, or download and modify, to send to your representatives. Please share this link with everyone you know so that they can use it as well. Together, we ARE making a difference!
LETTER TO YOUR REPRESENTATIVE – TEMPLATE
To the Honorable __________________
Dear Congressman/Senator ______________
I am very concerned about two pieces of legislation and a set of rules for implementing a law which will involve the possible loss of every American’s right to sell their own real estate without using a bank.
HR 4173 (Wall Street Reform and Consumer Protection Act)
Sponsor: Congressman Barney Frank (MA-4) introduced 12/02/09
Latest Action: Referred to Senate Committee on Banking, Housing and Urban Affairs
S3217 (Restoring American Financial Stability Act of 2010)
Sponsor: Senator Christopher Dodd (CT) Introduced 4/15/2010
Latest Action: Placed on Senate Legislative Calendar under General Orders, Calendar No. 349
If either of these two bills becomes law as currently written, a new Consumer Financial Protection Agency will be created. Among other things, it will incorporate new mortgage reform and anti-predatory lending regulations (previously introduced in HR 1728). Many of these are good ideas and necessary. But, what is not obvious in the title of either bill is the restriction of the very individuals and small businesses (including investors, home builders, and just Grandma and Grandma) it seeks to protect from financial disaster. These individuals and small businesses will be prohibited from offering to accept payments when they sell their own properties. In addition to helping sell properties and avoid foreclosure for many, seller notes are the only option for many homebuyers who can’t qualify to purchase a home using traditional financing. Seller financing is used in tens of thousands of sales every year between private individuals as it has since the early days of our country. These sales would essentially be eliminated because the homeowner would now be required to be licensed as a mortgage originator, and these licensing laws are very strenuous.
Why seller financing is needed:
- These rules would prohibit even partial financing – i.e. a “seller second” – literally millions of transactions every year.
- Bank loans are not available on some types of properties (millions of mobile homes, land, properties in disrepair, properties in flood plains, etc.)
- The tight lending climate has made bank financing “out of reach” for many who are self-employed, small business owners, contract employees, and others. Most affected are the lower income, elderly and those trying to enter the market as first time homebuyers.
- The federal tax incentive allowed first time home buyers to receive this credit for seller financed properties…but these initiatives would outlaw that credit.
- There are hundreds of thousands of vacant homes. Seller financing is often the method builders and homeowners used to sell these houses.
- Seller financing is an “age old” tradition based on private property rights.
- According to HUD’s “Residential Financial Survey” in 2001, roughly 40% of all non-farm residential properties in the US are owned free and clear.
- An estimated six million Americans own a property other than their own primary residence.
- An estimated 4.5% of Americans own three or more properties, many purchased solely as investment properties.
- 40% of non-owner occupied residences are mobile homes for which bank financing is unavailable.
- Approximately 5% of homes in the US are for sale or lease…seller financing may be key to liquidating this inventory and bringing back the real estate market in many distressed areas.
Summary: We don’t believe seller notes should be any part of these regulations because they are not loans of funds. This is similar to when someone wants to sell a house. If they are selling their own house, they don’t need a license. But, it they want to sell someone else’s house for a fee, they will have to follow licensing laws. We think using your own equity should be the same way. We are not loaning money, we are selling our personal property and receiving payments in exchange for equity.
What we want: We would like to see “seller financed” transactions exempted from the bill so that Americans are free to sell their own properties.
The SAFE Act – Proposed rules for Implementation
The SAFE Act itself never mentions private homeowners at all. The legislation was clearly directed toward those in the business of providing loans for a living. But, the implementation of these rules will completely eliminate all seller financing for properties which are not owner occupied (including land, investment properties, inherited properties, etc.).
The SAFE Act was passed to prevent mortgage banking fraud, but is now set to require cumbersome licensing of several groups of government employees, non-profits, and private homeowners who Congress never intended to include.
After releasing their rules HUD posted them for comment on the site www.regulations.gov. The public comments total over 5100 with the vast majority addressing the inclusion of seller financing and non-profit housing assistance agencies.
Without question, HUD has acted independently and created a mess. Mortgage industry leaders themselves have commented in opposition to the rules as have Fannie Mae, Freddie Mac, and related industry associations across the country.
Again we’d like to see Seller Financing excluded altogether from the HUD rules as it was never intended to be a part of the SAFE Act.