New Seller Financed Mortgage Rules

The Lending Rules under the Dodd-Frankel Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) were recently expanded to include seller financed transaction involving residential owner occupied real estate. Many transactions will therefore be subject to the Dodd-Frank Qualified Mortgage Rule (“QMR”). For those sellers who are in engaged in more than three seller finance loans per year, Dodd-Frank QMR will require a mortgage loan originator to be involved in order to complete the transactions. In addition, there are loan requirements which eliminate the use of a balloon payment, restrict the interest rate and require the seller to prove the borrower’s ability to re-pay the loan. There are further requirements for seller financing of one loan per year with respect to interest rates and for one to three loans per year eliminating balloon payments and restricting interest rates. Those loans involving title insurance coverage will be excluded from coverage for violations of Dodd-Frank and QMR. It is noteworthy that the new rules not only apply to mortgages, but also land contracts.

For all who are engaged in seller financing, a review of the Dodd-Frank/QMR Rules is a must and compliance is essential.

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    James B. Harrison

    James Harrison practices in the firm’s Business Law Practice Area. He has represented and counseled hundreds of businesses and organizations, including start-ups and emerging growth companies in all aspects of business law, including mergers, acquisitions, sale or other equity events as well as strategy around operations, funding, and exit.

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