Note Builders, Inc. is the first entity in the real estate brokerage and mortgage space to successfully ensure compliance with the new seller finacing regulations in the marketplace. Our mission is to originate compliant notes and maintain the value of the notes for our investors in the secondary market.
The SAFE Act, CA SB 36, and The Dodd Frank & Financial Reform Act severely restrict seller’s abilities to successfully complete COMPLIANT seller carry back transactions and protect the value of the underlying asset. Homeowners have become much savvier with the attention brought to the MERS issues about contesting the validity of notes for compliance and documentary issues. The Note Builders team feels extremely comfortable assuming the liability and ensuring our customers satisfaction when engaging in what is a foreign process to most buyers and sellers.
Over the past few years we have seen a significant increase in seller carry back transactions. The credit crunch, nonconforming and mixed use structures, and the lack of prime borrowers have forced many sellers to revert back to an axiom of the real estate business called seller financing. Traditionally, the ease of these transactions has made them much easier to structure and close than a bank loan. Buyers and sellers were free to negotiate terms that were beneficial to each party in an arm’s length transaction.
Fast forward to April 1, 2011. The SAFE act regulations and TILA loan originator compensation changes were scheduled to go into effect. Shortly before D Day, the National Association of Mortgage Brokers and the National Association of Independent Housing Professionals filed a lawsuit which resulted in a stay until April 5. On April 5, the stay was lifted and the regulations went into effect immediately. The mortgage business and seller financing specifically were changed forever by these new statutes reaffirmed on April 5.
Never before have sellers been restricted on financing their own properties using an installment sale. The SAFE act encompasses seller financing under the definition of a loan. Moreover, Brokers involved in these transactions need a loan originator license to take an application and negotiate credit terms. Sellers, while exempt in some situations, now must comply with TILA, Reg Z, RESPA, etc. to ensure that their loan is compliant and not subject to rescission by a defaulted borrower.
Compliance has catapulted to the forefront of debt instruments secured by property. The new frontier mandates meticulous documentation when originating seller carry back loans. Attorneys and Brokers have a fiduciary duty to their clients and must comply with the new laws as well. Note Builders, Inc. is excited to help clients across the United States achieve the comfort and security that seller financing can provide if done correctly. Thanks and we look forward to serving you.
Author: Jamall Broussard & Terry Lewis are principals of Note Builders, Inc.. Note Builders is a Mortgage Loan Originator service that can be assigned the responsibility of compliance in a seller financed transaction. DRE # 01898702 NMLS # 517367, Notebuilders.com
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