Seller Financed Higher Priced Mortgage Loans Require Full Disclosure!!

Seller Financed Higher Priced Mortgage Loans Require Full Disclosure!!

Effective 4/1/11, the Truth in Lending Act was amended with respect to many items. Among the
provisions amended was section 226.35. 226.35 has to do with higher priced mortgage loans. When
the CFPB codifies the final rule, higher priced mortgage loans and seller financing transactions will
become intertwined.

Dodd Frank stipulates that on a consumer credit transaction the seller has to determine that the buyer
has an ability to repay the loan. Higher priced mortgage loans will follow the same premise. Also, a
homeowner, even if meeting all of the other provisions for being exempt from disclosure requirements,
will still be subject to the higher priced loan provision. This is because any first lien 1.5% over the
average prime offer rate and any junior lien 3.5% over the average prime offer rate will be subject to
the higher priced loan disclosures and criteria. This means that there will be additional restrictions and
stipulations on prepayment penalties, escrow accounts, etc. This is a huge issue for sellers looking to
finance properties in the marketplace.

With the litigious environment, it’s only plausible for seller to hire Note Builders to structure these
transactions to ensure compliance and retain the value of the note!

The Author Jamall Broussard, is the Chief Executive Officer of Note Builders, Inc. Note Builders

is a MLO specializing in third party compliance for sellers and buyers of real estate. DRE # 01898702

NMLS # 517367 Notebuilders.com