Senate Bill Restricts Seller Financing --
Take Action Now To Stop It

Clint Hinman, editor of NoteWorthy Newsletter, has done a great
job of explaining H.R. 1728:

HR 1728 - WHAT IT SAYS AND WHY IT WILL HURT CONSUMERS AND SMALL BUSINESS
The U.S. Senate will soon be considering a bill that will severely
restrict the property rights of millions of Americans and the way
you do business going forward.

WHAT ARE WE TALKING ABOUT?

HR 1728 was recently passed by the House of Representatives with
little fanfare and even less press coverage. Not until it was
referred to the Senate did it grow legs and start getting the
attention of everyone it will affect. The full text and status of the bill can
be read here: http://snipurl.com/hr1728

WHAT DOES IT SAY?

The proposed legislation focuses upon the predatory lending practices
of yesteryear and the resulting subprime debacle, imposing stringent
requirements on mortgage brokers, servicers, appraisers, etc.
Unfortunately, owner financing gets caught up in the dragnet, and the
impact could be devastating. The offending text of the bill is in
section 101(3)(e), which defines who is exempt from being a
'licensed mortgage originator':

'(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.

WHAT DOES THIS MEAN?

As long as you provide owner financing on the sale of your property
no more than one time every three years, you will not be in violation
of the statute. Any individual who does sell more than one property
every three years via owner financing will be in violation unless
they are a 'licensed mortgage originator'. State laws vary, but
typically a 'licensed mortgage originator' must have a $25,000 to
$50,000 surety bond, three years mortgage origination experience, a
physical business office in the state in which the property is
located, and continuing education requirements. In other words, very
few, if any, Mom & Pop sellers will ever jump through the hoops to
become a 'licensed mortgage originator'.

WHAT KINDS OF TRANSACTIONS WILL BE COVERED?

Selling your own home using a land contract or owner-held mortgage
with the intent of getting a faster sale, a higher sales price, or
higher rate of interest than is available in other investments will
no longer be an option (unless that sale is limited to once every
three years). Carrying back second mortgages on investment
properties you sell will also be a violation of the law. In fact,
any kind of installment sale on residential properties (including
houses, condos, mobile homes, and residential land lots more than
once every three years will be subject to this legislation.

The original bill presented to the House didn't make any exceptions
to owner financing. The National Association of Realtors argued to
include the exception of one owner financed property every three
years. Without addressing owner financing, many in the House
contended owner financing would become the 'loophole' for
predatory lenders to continue their exploitative ways.

WHAT'S THE PROBLEM?

Owner financed notes are not loans. There is no transfer of money,
no points or closing costs, and no mortgage brokers involved. They
are not created with the intent of selling them off to
government-sponsored entities like Fannie Mae, Freddie Mac, or FHA.
They are INSTALLMENT SALES. The borrower receives no money that must
be repaid, only a property on which periodic (read: installment)
payments must be made.

Just as egregious is the loss of private property rights. The
government should have no power to legislate how property owners
dispense of their properties. If a property owner is willing to
finance the sale of a property to a buyer, whom is the government
trying to protect by making the transaction illegal? States already
have usury laws and servicing requirements that protect the
purchasers.

If passed by the Senate, this legislation will:

1. Severely limit the number of property owners who can legally
owner finance the sale of their properties.

2. Make violators out of everyday Americans who, unaware they
are breaking the law, are merely trying to sell their properties
and/or offering financing to prospective homeowners who cannot obtain
conventional financing.

3. Require obscene amounts of due diligence on the part of note
investors to make sure all facets of this legislation have been
complied with.

4. Give prospective homeowners even fewer options to realize the
American Dream of homeownership.

5. Cost the U.S. taxpayers over $400 million dollars to enforce.

WHAT CAN I DO?

Contact your senator via phone, fax, e-mail or snail mail. Implore
them to vote NO on the bill as it's currently written. You can get
your senator's contact information here. We have included some
sample letters assembled by Vena Cox-Jones that will assist you in
knowing what to say and how to say it. Additionally, we at
NoteWorthy have written a fourth letter for owner financed note
brokers.

Please keep in mind that our best plan of action is to address how
this legislation will hurt 'the little guy', i.e. buyers and
sellers of properties. Even though we all consider ourselves 'the
little guy', the government has made it clear that anyone
associated with mortgages is 'the bad guy', and has little
interest in how this bill may affect your business, your family, or
your livelihood. Be civil, cordial, and intelligent in your
communications with your senators' offices. Remember you can catch
more flies with honey than with vinegar.

Take action today or suffer the consequences of this legislation
tomorrow. ASK YOUR SENATORS TO VOTE NO ON HR 1728!!!

SAMPLE LETTERS

IF YOU ARE A NOTE BROKER
Dear Senator [name];

My name is Clint Hinman and I have been a resident of Washington
since 1993.

I am writing 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 property owners in the Act
(see section 101(3)(e)) will enormously reduce the housing choices of
Washingtonians and the ability of homeowners to sell properties in a
market already languishing from an abundance of unsold properties.

As someone who buys and brokers owner financed notes, I encounter
hundreds of instances every year where home sellers and buyers came
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 down payment
needed for conventional financing.

In every situation, these sales were 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 a new home at an
affordable payment and interest rate with none of the usual costs
(points, application fees etc) inherent in conventional mortgage
transactions.

In Washington, 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, which is often the only option for many sellers to sell and
buyers to 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 do
not cause the problems this bill seeks to solve. They do not originate
these notes to sell to government-sponsored entities (Fannie Mae,
Freddie Mac, FHA, etc.), but instead hold them as investments, often
as a source of long-term income. HR 1728 would be extremely harmful
to thousands of your constituents if passed as currently worded.

This legislation 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.

Respectfully,

Clint Hinman
Proficient Note Buyers LLC
Phone #
email

IF YOU HAVE A REAL ESTATE LICENSE
Dear Senator [name];

My name is Vena Jones-Cox and I am a life-long resident of
Cincinnati.

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;

Vena Jones-Cox
Licensed Real Estate Broker license #
Phone #
email

IF YOU SELL HOUSES WITH OWNER FINANCING
Dear Senator [name];

My name is Vena Jones-Cox and I am a life-long resident of
Cincinnati.

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 homeowners 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 down payment 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;

Vena Jones-Cox
Perfect Properties, inc.
Phone number
email

IF YOU BUY HOUSES WITH OWNER FINANCING
Dear Senator [name];

My name is Vena Jones-Cox and I am a life-long resident of
Cincinnati.

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 homeowners 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 cannot continue to buy and renovate
properties in the neighborhoods that so need my colleagues and me 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;

Vena Jones-Cox
Perfect Properties, inc.
Phone number
email