The U.S. Senate is considering a bill that would severely limit the way you do business as a creative real estate investor and, more importantly, is an inexcusable infringement of the property rights of all Americans.
HR 1728, which you can view in its entirety here, deals with a plethora of mortgage-related issues, mostly around limited terms and fees on residential loans.
But the heinous piece of the legislation is in section 101(3)(e), which defines the affected principals as:
(E) does not include, with respect to a residential mortgage loan, a person, estate, or trust that provides mortgage financing for the sale of 1 property in any 36-month period, provided that such loan -
(i) is fully amortizing;
(ii) 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;
(iii) has a fixed rate or an adjustable rate that is adjustable after 5 or more years, subject to reasonable annual and lifetime limitations on interest rate increases; and
(iv) meets any other criteria the Federal banking agencies may prescribe;
Yeah, I know, confusing.
But here’s what it says:
You are NOT subject to the law as long as you DON’T sell more than 1 property with owner financing every 3 years!
Or, to put it another way, you ARE subject to the limitations of the law if you DO sell more than one property every 3 years via a land contract, owner-held mortgage or wrap-around mortgage… and who knows if they’ll define lease/options as owner financing, too?
So what does it mean to be “subject to the law”?
Well, at the very least, it means that you will have to comply with a long, confusing, and penalty-filled piece of national legislation.
Here are the types of transactions that you would be restricted from doing more than once every 36 months:
- Selling YOUR OWN HOME using a land contract or owner-held mortgage so that you can get a quicker sale, higher sale price, or better rate of interest than is available in other investments
- Carrying back owner-held second mortgages on investment properties that you sell
- Doing any kind of installment sale on residential properties including homes, condos, mobile homes, and even raw land that is zoned residential
Yes, there will undoubtedly by ways to “get around it” - some have suggested that getting a mortgage broker’s license and then learning and following the vast new set of regulations would circumvent the “problem”.
But the bottom line is, this law has to be stopped and it has to be stopped NOW.
Here’s why:
- Congress is trying to regulate the wrong thing.
The deals we make are not “loans” - they don’t involve the transfer of money, or points or closing costs or adjustable rates or any of the other things that caused the mortgage crisis to begin with. They are INSTALLMENT SALES.
We don’t give money to the “borrower” and wait for it to be paid back: we give a property to the borrower and wait for it to be paid off. Regulating this will have no effect on the foreclosure crisis.
- It is a completely unacceptable infringement on private property rights.
When I own a piece of property and I find a ready, willing, and able purchaser, I should be able to control the sale of that property within the existing laws of my state, which already regulate the interest rate that I am able to charge and some of the terms of the sale.
The government does not have the right to tell us that we need special licensing to sell our own properties; nor do they have the right to further regulate the terms under which we can sell or burden small investors with a new set of rules that we can’t comply with.
Not only will this new law, if passed as written, effectively choke off owner financing as an exit strategy for you, it will also take away housing choice for your buyers. The millions of Americans who’ve been through foreclosure in the last 3 years can’t buy a house in any way OTHER THAN to negotiate owner financing with a seller - and HR 1728 would greatly reduce the number of properties available in this way.
Millions of potential home owners who would otherwise be able to re-start the process of paying off a home, and get the tax advantages of ownership, will be reduced to renting until they are able to qualify for bank financing.
Here’s What to Do Right Now:
This bill has already passed the house and is waiting for Senate approval. Please contact your senator via email and snail mail to let him know that this law MUST NOT PASS in its current form. You can get your senator’s contact information here:
http://www.senate.gov/general/contact_information/senators_cfm.cfm
As always in cases like this, you have an automatic handicap to overcome… the fact that you are a real estate investor and are therefore viewed as part of the problem. So when you write, don’t emphasize the nature of your business, just that you and your buyers would be greatly aversely affected by the new law.
We need THOUSANDS of these communications to go out in the next few days to have a CHANCE of stopping this in its tracks. So whether you’re a new or experienced investor, PLEASE take the time right now to write your elected representative!
Here are some sample letters or emails…
Dear Senator [name];
My name is [insert name here] and I am a life-long resident of [insert city name here].
I am writing you to encourage you to vote NO on HR 1728, the “Mortgage Reform and Anti-Predatory Lending Act”.
While many of the provisions of the act are positive steps toward mortgage reform, the inclusion of private owners in the act (see section 101(3)(e)) will enormously reduce the housing choice of [Ohioans] and the ability of home owners to sell properties in this already-slow market.
As a real estate broker, I have seen several dozen cases in the past year of home sellers and buyers coming to an agreement for an installment sale on a property that the owner desperately needed to sell (often to avoid foreclosure) and the buyer desperately wanted to buy, but could not raise the downpayment needed for conventional financing.
In all cases, these sales turned out to be win-win deals for the buyer and seller; the seller was able to get rid of an unwanted property to a buyer who loved it, and the buyer was able to get his new home at an affordable payment and interest rates with none of the usual costs (points, application fees etc) inherent in more conventional mortgage transactions.
In [Ohio], these transactions are already regulated by state law: a low maximum interest rate is already in place, and both the buyer and seller are protected by other regulations at the state level.
In defense of private property rights, owners should be exempted from the burdensome and unnecessary rules that this law foists upon them. In its current form, it would all but shut off the “owner financing” market that is the only way that many sellers can sell and many buyers can buy right now.
PLEASE DO NOT LET THIS RESTRICTION ON PRIVATE PROPERTY RIGHTS PASS THE SENATE. It is unnecessary to stop private buyers and sellers from transacting business that is beneficial to both of them-they are not the problem that the bill seeks to solve. HR 1728 would be extremely harmful to thousands of your constituents.
It will exacerbate the problem OF foreclosure, as fewer sellers will be able to sell their homes to avoid it, and CAUSED BY foreclosure, as fewer buyers who have recently experienced foreclosure will be able to re-start the process of home ownership inexpensively and easily by negotiating owner financing.
Thank you for your consideration;
Insert Name
Licensed Real Estate Broker license #
Phone #
email
Dear Senator [name];
My name is [insert name here] and I am a life-long resident of [insert city name here].
I am writing you to encourage you to vote NO on HR 1728, the “Mortgage Reform and Anti-Predatory Lending Act”.
While many of the provisions of the act are positive steps toward mortgage reform, the inclusion of private owners in the act (see section 101(3)(e)) will enormously reduce the housing choice of [Ohioans] and the ability of home owners to sell properties in this already-slow market.
As a professional housing provider, I sell several houses each year to home buyers on installment sale [or, if you have not purchased a property, add here: “I had planned to sell several houses this year on installment sale]-a practice that would become impossible under this law in its current form.
I find that in today’s slow market, the best way for me to help buyers who desperately want to become homeowners, but who cannot raise the downpayment or meet the other terms needed for conventional financing, is to allow them to make payments directly to me.
These sales are win-win deals for both the buyer and myself; I am able to turn over homes that I’ve bought and rehabbed (often from foreclosures) to buyers who love and can afford them, and the buyer can get his new home at an affordable payment and interest rates with none of the usual costs (points, application fees etc) inherent in more conventional mortgage transactions.
In [Ohio], these transactions are already regulated by state law: a low maximum interest rate is already in place, and both the buyer and seller are protected by other regulations at the state level.
Without the ability to sell homes in this way, I will no longer be able to invest in and renovate any of the tens of thousands of vacant, ugly houses placed on the market by the foreclosure crisis, and my small-but-beneficial business will literally be in ruins. Perhaps more importantly, the homeowner-buyers that I serve will be forced to rent rather than moving toward the American dream of home ownership.
In defense of private property rights, owners should be exempted from the burdensome and unnecessary rules that this law foists upon them. In its current form, it would all but shut off the “owner financing” market that is the only way that many sellers can sell and many buyers can buy right now.
PLEASE DO NOT LET THIS RESTRICTION ON PRIVATE PROPERTY RIGHTS PASS THE SENATE. It is unnecessary to stop private buyers and sellers from transacting business that is beneficial to both of them-they are not the problem that the bill seeks to solve. HR 1728 would be extremely harmful to thousands of your constituents.
It will exacerbate the problem OF foreclosure, as fewer sellers will be able to sell their homes to avoid it, and CAUSED BY foreclosure, as fewer buyers who have recently experienced foreclosure will be able to re-start the process of home ownership inexpensively and easily by negotiating owner financing.
Thank you for your consideration;
Insert Name
Perfect Properties, inc.
Phone number
email
Dear Senator [name];
My name is [insert name here] and I am a life-long resident of [insert city name here].
I am writing you to encourage you to vote NO on HR 1728, the “Mortgage Reform and Anti-Predatory Lending Act”.
While many of the provisions of the act are positive steps toward mortgage reform, the inclusion of private owners in the act (see section 101(3)(e)) will enormously reduce the housing choice of [Ohioans] and the ability of home owners to sell properties in this already-slow market.
In the past year, I have purchased and renovated several homes-made possible only because the sellers of these homes were able to sell to me using owner financing in an unrestricted way.
For many of these property owners, seller financing was the only way to unburden themselves of an unwanted property that, in some cases, was headed toward foreclosure before I purchased it.
Without this ability, I can not continue to buy and renovate properties in the neighborhoods that so need me and my colleagues to invest our time, energy, and money in rehabbing properties. Bank financing is not an option for these properties because of the condition; only financing carried by the sellers will suffice.
Section 101(3)(e) would keep my sellers from utilizing this method of getting rid of unwanted properties in today’s market, should they have more than 1 to sell.
In defense of private property rights, owners should be exempted from the burdensome and unnecessary rules that this law foists upon them. In its current form, it would all but shut off the “owner financing” market that is the only way that many sellers can sell and many buyers can buy right now.
PLEASE DO NOT LET THIS RESTRICTION ON PRIVATE PROPERTY RIGHTS PASS THE SENATE. It is unnecessary to stop private buyers and sellers from transacting business that is beneficial to both of them-they are not the problem that the bill seeks to solve. HR 1728 would be extremely harmful to thousands of your constituents.
It will exacerbate the problem OF foreclosure, as fewer sellers will be able to sell their homes to avoid it, and CAUSED BY foreclosure, as fewer buyers who have recently experienced foreclosure will be able to re-start the process of home ownership inexpensively and easily by negotiating owner financing.
Thank you for your consideration;
Insert Name
Perfect Properties, inc.
Phone number
email
Thanks to Peter Conti for article content & for bringing this to my attention.
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Posted in Real Estate | Comments (22)
Posted on June 8th, 2009
Ihave received dosens of emails from Gurus. No one has even mentioned this. Looks like we investors are asleep at the switch. Will share with all who willb listen. Lill
Posted on June 8th, 2009
Thanx guys for this info. You guys are the very 1st who brought this to my attention.
I personally used to go to a lot of Grassroot movement rallies a few years ago but since stopped
to pursue my American Dreams. Even though I’m not as active as before I’m always alert
becuz these idiotic resolutions keep on getting passed. This is serious because it causes damage
To All Americans especially to the ones who have fallen victim to these institutions that weren’t
Properly regulated in the first place.
This completely destroys everything us real estate investors have done to help families get another chance,
To provide a safe living environment for children to reside,
To properly use governmet money to provide these environments as a result from creative financing,
and to be compensated for doing so…its the American Dream which is right and this resolution is wrong.
Its wrong because it violates my right and the rights of others to the pursuit of happiness.
Who can tell me and a homeowner that we can’t come to an agreement, its their property not the govenment’s.
If this is the inly solution for both parties involved and its going to bring relief and happiness to the owner,
Who says I can’t do that?
Thank you again for this info, I’m not as much shocked by this because I personally have a reasoin to believe that this is part
Of another way to keep on taking peoples homes and not having certain people a place to live and only now its pre-emptive.
And others out there in our industry must say and do their part especially the “Gurus” because if you don’t, it doesn’t take a genious
To notice you don’t care and just want to keep on selling stuff, people in and fresh to the industry will ignore you and you can go and join
Those causing the problem, unless your paid for already.
Thank you and the best of prosperity to you.
Posted on June 8th, 2009
Andy,
Thanks for the information. Very interesting what they are cooking up in Washington these days.
Posted on June 8th, 2009
Hey Andy
Thanks for informing us about HR 1727. I have sent an email to both of my NC Senators urging
them not to let this Bill pass.
Thanks Again
John Page
Posted on June 8th, 2009
Hey Andy,
I just wanted to say that my girlfriend and I just each sent emails to both Senators from Washington State.
Please my fellow Investors out there take the time to write emails to both Senators in your state so we can put a stop to these one size fits all laws that affects our industry in a very unjustified way.
Act Now!!
Best,
David Michaels
Professional Real Estate Investor
PS: At the least cut and paste one of the 3 Letters above into the form email for each Senators office.
Posted on June 8th, 2009
I too, am just seeing this for the first time! Why has no one mentioned it before? I get tons of emails from gurus, other investors, wholesalers, REI clubs, etc. I will contact my local reps & pass the word along.
Thanks, Andy
Posted on June 9th, 2009
Thanks for info. Need to stop this bill period!
Posted on June 9th, 2009
Thanks for the timely update. Forwarded to the REIA group here in OregUn @ nwreii@yahoogroups.com
Posted on June 9th, 2009
Hey I was just wondering in the title you are calling this HR1787 and in the body and link you are calling it HR 1728. Is the title a typo, or does a bill change numbers from House to Senate?
I have sent a message to both Texas Senators.
Thanks for the awareness.
Sam
Posted on June 9th, 2009
Thanks Andy,
Whooh! This info is hot. JC said it right. All those gurus out there should get the ball going to fight this new movement to restrict our rights to the American Dream.
My husband & I are new in the investment field but yes, we have the responsibility to and we will write to Congress to think again about this move. Certainly, it will not help the situation–rather it will prolong the hardships of so many Americans. Thank you.
Myriam
Posted on June 10th, 2009
@Sam - thanks for catching that! Total typo & corrected.
Thanks everyone for your action on this.
Andy
Posted on June 10th, 2009
To try to ‘level the playing field’ (which we need to do) consider trying to communicate with the local Board Of Realtors, or newspapers (make a good story to them), or radio stations.
As I said, it’s all about mass exposure! Let’s go gettum!!!
Mike
Posted on June 11th, 2009
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Posted on June 11th, 2009
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Posted on June 19th, 2009
Thank you so much for letting us know about this bill. My letter to Sen. Sherrod Brown (D-Ohio) has already been emailed.
Hopefully he and others will listen.
Cindy Steele
Posted on June 23rd, 2009
Dear Andy, Very well done article on a very very important issue of the day - the House missed it completely and is being inundated by emails from retirees who are seeing their ability to sell their homes for an income stream disappear by the impending passage of HB 1728. The senate is the last and present place that this bill can be stopped. The banks smoked this one though the House. House members are streaming up to the Senate begging the senators to kill the bill. because the House now knows a huge mistake was made. They need our support. Very best to you always, Jay and Barb
Posted on July 6th, 2009
Andy,
This Wed, Fl House Rep, Kevin Ambler is speaking to my investor group about current and proposed legislation that impacts us as investors. It is absolutely frigtening the legislation that is being proposed and even MORE frightening that it is completely ignored by the media. Thank God YOUR blog came up when I googled “house bill 1728″. I will share it with my investors AND my entire list.
Thanks again
Lydia Trotter
“the Real Estate eBay Lady”
Posted on July 7th, 2009
This bill may may or not go through. But this will only limit investors to how they buy and sell deals. Seems like at worse just LLC every property as an entity to get around this or just sell as assignment to seller or next buyer as and LLC.. deal Done!
Just a thought!
P.
Posted on March 26th, 2010
Hi,
cool info. Foreclosures suck and I’m stuck with it but it’s great to know people still write good none BS articles like this. Helps me get through the day
Thanks man!
Posted on May 12th, 2010
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Posted on May 25th, 2010
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Posted on May 31st, 2010
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