On July 21, 2010, the Wall Street Reform and Consumer Protection Act, H.R 4173 was signed into law by President Barrack Obama. According to the U.S. Chamber of Commerce in Washington, the act will require federal agencies to develop 520 rules, conduct 81 studies and issue 93 reports.
The Treasury Department will have to set up a Federal Insurance Office while the Federal Reserve Bureau will form a Consumer Financial Protection Bureau, which will include an Office of Financial Protection for Older Americans and an Office of Financial Literacy. Other reforms created by the legislation will impact bank and hedge fund regulation and formation of the Financial Stability Oversight Council.
The revised version of H.R. 4173 includes some improvements over the initial version challenged by the National Real Estate investor Association, the National Association of Realtors, and you our readers; members of the real estate investing community and property owners across the country. Rather than limiting seller financing to a single transaction every 36 months, the version signed into law allows for up to three seller-financed transactions in a twelve-month period. There are a number of requirements that must be adhered to. American property rights are still under attack and it is incumbent on every citizen to continue to voice our concerns and remain ever vigilant.
The key element affecting property owners who seek to assist homebuyers by providing seller financing is section 103 (2) E in the definition of Mortgage Originator. Mortgage Originators, under the Residential Mortgage Origination Standards section of Subtitle A, “does not include, with respect to a residential mortgage loan, a person, estate, or trust that provides mortgage financing for the sale of 3 properties in any 12-month period to purchasers of such properties, each of which is owned by such person, estate, or trust and serves as security for the loan, provided that such loan—
‘‘(i) is not made by a person, estate, or trust that has constructed, or acted as a contractor for the construction of, a residence on the property in the ordinary course of business of such person, estate, or trust;
‘‘(ii) is fully amortizing;H. R. 4173—763
‘‘(iii) is with respect to a sale for which the seller determines in good faith and documents that the buyer has a reasonable ability to repay the loan;
‘‘(iv) has a fixed rate or an adjustable rate that is adjustable after 5 or more years, subject to reason- able annual and lifetime limitations on interest rate increases; and
‘‘(v) meets any other criteria the Board may prescribe;”
In addition to the three transactions per year limitation we must be watchful of E(v), “meets any other criteria the Board may prescribe. That gives the Board carte blanche to make changes without the will of the people being considered. These are not people that can be voted out of office, they are political appointees. We came very close to losing control of our own property with this legislation. As it is our rights have been diminished and many people’s futures jeopardized.
What do you think? I’d love to hear your opinion?
Well, I am glad they have changed the law in way which can only help the real estate market, and thereby the construction industry as well. I have invested in property in London, (and through my brother in LA), and I was always surprised by the harsh legislation in the US, compared with the UK.
I am surprised that I am the first one to post. Surely the public must have more to say about this than an amateur investor from London?
Martin, Preisler Construction Ltd.
In the US we only get to elect our lawmakers and then sadly we get left out of the loop. Our lawmakers never make an intentionally bad law, however the law of unintended consequence tends to wreak havoc with whatever our legislators come up with. In addition, they frequently try to fix in a weekend a problem that took a decade or two to create.
Augie never has a truer word been spoken. We get to elect and its all about us – then we get no say in the laws created.. Fast fixes continue to baffle me.. Let’s think about the bigger picture for a change..
I wonder what the founding father’s reaction would be if they were to weigh in on today’s political scene…
To your success…
Augie
The founding father’s honestly would be turning in their grave.. These decisions are complete madness.. No wonder we are having so many economical challenges.. It just baffles me.. Well put Augie..
Agree that the economical decisions of late have been ‘unusual’ to say the least… But who is to say our founding father’s would make better decisions were they alive today? I think we are living in some of the tougher economic times ever and the government is managing it OK all things considered….
I agree that the founding fore fathers would be turning in their graves. Look at our current state of economy, ugh. They would be disappointed.
I think there’s probably something I don’t understand here. Doesn’t this mean that sellers can now finance up to three transactions in a year instead of one every 36 months? This is nine times more transactions in a three year period. That seems like more freedom not less, so I’m confused about how this is a diminishment of rights. It wouldn’t be the first time I got lost. :p
You raise an interesting point. Maybe I can help clarify. Prior to the imposition of these restrictions by the federal government there were no limitations on how an American property ownercould choose to sell their property. Additionally, there are many of hard working citizens who have worked long and hard to build rental portfolios with the intent of selling them with financing in order to supplement their retirement income. When they began there were no restrictions and now there are. Last but not least, many properties in the US do not quality for bank financing as an example older mobile homes or manufactured housing don’t qualify for bank financing which means either cash or seller financing. The same applies to condos in many markets.
Finally, any diminishing of American rights, especially rights of property ownership, moves us further away from the freedoms this country was founded to provide. Once taken away, rights are seldom returned. Thanks for your comment.
To your success…
Augie
Isn’t it a giant leap from one transaction every 36 months to maximum of three seller financed transactions in 12 months? I just wonder who would benefit more from this revised law.
When the individual cannot sell their property without a government authorized corporate sponsor (such as a bank) basic liberties are being jeopardized. WHile I agree it is a small move on the part of the crafters of the legislation, it is a 9 to 1 improvement, which, for the small investor or property owner is a very positive step. No restrictions would be more appropriate but the common citizen no longer has much clout with our elected officials. As for who benefits, that’s simple…the financial services sector. The losers are those who do not meet the personal or credit profile for whom traditional lenders exist (seasonal employees, self-employed persons, people who relocate for job opportunity but lack enough time on the job, etc.) nor the sellers who need to sell properties which do not attract bank financing (sellers of condos, mobile homes, lower priced properties or properties which need work to name but a few).