How Will the Dodd-Frank Act Affect Us?
The Dodd-Frank Act takes effect January 10, 2014 and changes the rules for seller financing for those not qualifying as exempt. The most relevant changes are:
- Requires every lender to consider the borrower’s ability to repay the loan
- Requires that lenders consider at least 8 factors applied against reasonable underwriting guidelines
- The Lender must write a “qualified loan”
- Requires lenders to wait at least 120 days of delinquency before foreclosing
- Dodd-Frank combined with the SAFE Act in the various states, will require all owner finance transactions (except the exceptions) to be originated by a Residential Mortgage Loan Originator
- Prohibits builders from selling with owner financing
- Eliminates balloons and negative amortizing loans and requires fixed rates for 5 years with no prepayment penalties
- Sellers who sell with owner financing more than 3 times a year will become mortgage originators and must comply with Dodd-Frank
- No forced arbitration clause is allowed in the buyer’s note