Many brokers have been expressing concern about the upcoming changes in investor financing. Here is some information that was recently shared from the Department of Regulatory Affairs (DORA) about the implementation of Dodd-Frank in Colorado. This information is directly from the 2012 Colorado Commission Update Course:
- HUD rules state that sellers:
- Selling their personal residence or second home, may offer seller financing to residential home buyers up to three (3) times in any given year.
- Selling property to someone who intends to use the property as a rental are exempt, and investors selling non-residential property with seller financing are also exempt.
The Dodd Frank Act 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:
- The seller did not construct the home
- The loan is fully amortizing (no balloon mortgages allowed).
- The seller determines in good faith and documents that the buyer has a reasonable ability to repay the loan.
- The loan has a fixed rate or is adjustable after 5 or more years, subject 10 reasonable annual and lifetime caps.
- The loan meets other criteria set by the Federal Reserve Board.
- Title XIV of Dodd Frank Act will not take effect until 2013.