Rent To Own A Thing Of The Past

Dated: 06/28/2014

Views: 647

Title XIV of the DFA states that no creditor may make a mortgage loan without making a reasonable or good faith determination that the customer has the ability to repay the loan.
“Qualified mortgages,” as defined in Title XIV, are
considered to have met the ability to repay standard.The Federal Reserve Board published a proposed rule on May 11, 2011. Comments are due to the CFPBby July 22. The CFPB takes over responsibility for Title XIV on July 21. Title XIV will not take effect untilfinal regulations to be issued by the CFPB go into effect. CFPB has until January 21, 2013, to issue thefinal regulations, and they must take effect no later than 12 months after their issuance. If CFPB missesthe deadline, Title XIV takes effect anyway on January 21, 2013.The DFA definition of mortgage originator exempts an individual (or an estate or trust) that provides mortgage financing for no more than 3 properties in any 12 month period from the requirements of Title XIV, but only if the financing meets certain rules:
1. The seller did not construct the home.
2. The loan is fully amortizing (no balloon mortgages allowed).
3. The seller determines in good faith and documents that the buyer has a reasonable ability to repay the loan.
4. The loan has a fixed rate or is adjustable after 5 or more years, subject to reasonable annual and lifetime caps.
5. The loan meets other criteria set by the Federal Reserve Board.

So this seems like mumbo jumbo, in reality landlords will no longer be able to do private loans to individuals for a Rent to Own scenario. An owner can sell to an investor on time as that is not the same as being an owner occupant, though there are new rules for that as well.
An owner can sell to one individual on time per year at a specific rate for a 5 year period. The loan can not have a balloon payment at the end of 5 years, though the rate can change after 5 years. I have no information on the amount that it can change, just that it can increase.
More owners are going to either stop this practice all together, because of all the regulations and paperwork required, or they are going to start requiring 10 to 15% up front money to do this kind of owner financing.
Owners may also be required to be regulated as a mortgage broker and have a license to be a lending institute if the do more than 4 of these in a year. That is a combination of investor pay on time and owner occupants of which can only be one per year.
Let me know if I can help you out with this. I have a great real estate attorney I work with and some great lenders who do this for a living not as a hobby.
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Rick Hogue

As the team leader for our group, my responsibility is to all of our clients to insure they are treated with respect and all of their needs are met. In addition I am the listing agent for the team hel....

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