Thursday, April 27th, 2017

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STOP H.R. 1728: Anti-Property Owner, Anti-America

( the U.S. Congress )The U.S. Senate is considering a bill that would severely limit the way you do business as a creative real estate investor and, more importantly, is an inexcusable infringement of the property rights of all Americans.

HR 1728, which you can view in its entirety here, deals with a plethora of mortgage-related issues, mostly around limited terms and fees on residential loans.

But the heinous piece of the legislation is in section 101(3)(e), which defines the affected principals as:

(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;

Yeah, I know, confusing. But here’s what it says:

You are NOT subject to the law as long as you DON’T sell more than 1 property with owner financing every 3 years!

Or, to put it another way, you ARE subject to the limitations of the law if you DO sell more than one property every 3 years via a land contract, owner-held mortgage or wrap-around mortgage… and who knows if they’ll define lease/options as owner financing, too?

So what does it mean to be “subject to the law”?

Well, at the very least, it means that you will have to comply with a long, confusing, and penalty-filled piece of national legislation.

Here are the types of transactions that you would be restricted from doing more than once every 36 months:

  • Selling YOUR OWN HOME using a land contract or owner-held mortgage so that you can get a quicker sale, higher sale price, or better rate of interest than is available in other investments
  • Carrying back owner-held second mortgages on investment properties that you sell
  • Doing any kind of installment sale on residential properties including homes, condos, mobile homes, and even raw land that is zoned residential

Yes, there will undoubtedly by ways to “get around it” – some have suggested that getting a mortgage broker’s license and then learning and following the vast new set of regulations would circumvent the “problem”.

But the bottom line is this:

This law has to be stopped and it has to be stopped NOW.

Here’s why:

  1. Congress is trying to regulate the wrong thing.The deals we make are not “loans” – they don’t involve the transfer of money, or points or closing costs or adjustable rates or any of the other things that caused the mortgage crisis to begin with. They are INSTALLMENT SALES.We don’t give money to the “borrower” and wait for it to be paid back: we give a property to the borrower and wait for it to be paid off. Regulating this will have no effect on the foreclosure crisis.
  2. It is a completely unacceptable infringement on private property rights.When I own a piece of property and I find a ready, willing, and able purchaser, I should be able to control the sale of that property within the existing laws of my state, which already regulate the interest rate that I am able to charge and some of the terms of the sale.The government does not have the right to tell us that we need special licensing to sell our own properties; nor do they have the right to further regulate the terms under which we can sell or burden small investors with a new set of rules that we can’t comply with.

    Not only will this new law, if passed as written, effectively choke off owner financing as an exit strategy for you, it will also take away housing choice for your buyers. The millions of Americans who’ve been through foreclosure in the last 3 years can’t buy a house in any way OTHER THAN to negotiate owner financing with a seller – and HR 1728 would greatly reduce the number of properties available in this way.

    Millions of potential home owners who would otherwise be able to re-start the process of paying off a home, and get the tax advantages of ownership, will be reduced to renting until they are able to qualify for bank financing.

Here’s What to Do Right Now:

This bill has already passed the house and is waiting for Senate approval. Please contact your senator via email and snail mail to let him know that this law MUST NOT PASS in its current form. You can get your senator’s contact information here:

http://www.senate.gov/general/contact_information/senators_cfm.cfm

As always in cases like this, you have an automatic handicap to overcome… the fact that you are a real estate investor and are therefore viewed as part of the problem. So when you write, don’t emphasize the nature of your business, just that you and your buyers would be greatly aversely affected by the new law.

We need THOUSANDS of these communications to go out in the next few days to have a CHANCE of stopping this in its tracks. So whether you’re a new or experienced investor, PLEASE take the time right now to write your elected representative!

Here are some sample letters or emails…

IF YOU HAVE A REAL ESTATE LICENSE:
Dear Senator [name];
My name is [insert name here] and I am a life-long resident of [insert city name here].

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;

Insert Name
Licensed Real Estate Broker license #
Phone #
email

IF YOU SELL HOUSES WITH OWNER FINANCING:
Dear Senator [name];
My name is [insert name here] and I am a life-long resident of [insert city name here].

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 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 downpayment 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;

Insert Name
Perfect Properties, inc.
Phone number
email

IF YOU BUY HOUSES WITH OWNER FINANCING:
Dear Senator [name];
My name is [insert name here] and I am a life-long resident of [insert city name here].

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.

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

Insert Name
Perfect Properties, inc.
Phone number
email

Thanks to Peter Conti for article content and to Andy Proper and Sam Bell for bringing this to my attention.

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About 

JP Moses is a roughly-hewn man-child who first got into REI after reading Rich Dad, Poor Dad back in Y2K and went full time in 2002. He's tinkered in everything from landlording to short sales to rehabs to Realtoring to REOs to notes to owner financing, blah, blah, blah...Till he finally stuck his flag deep into wholesaling and has since flipped somewhere north of a couple hundred deals.

JP's not a “guru” but also doesn't think it's a bad word. Among his core values are authenticity, creativity, big honkin' value, general fun-ness and being unshaven. He's super proud to be chief blogger guy at REItips.com and host of the free REIology podcast. He also thoroughly enjoys sharing his 53 best real estate investing forms with anyone who wants them. You should totally check that out. :-)

  • JP,

    I will definitely send out a letter today. I’ll send out the letter as a real estate agent, because I’m sure it will be better received wearing that hat instead of my investor hat. 🙂

    Thanks for posting this.

    Carey

  • JP,

    I will definitely send out a letter today. I’ll send out the letter as a real estate agent, because I’m sure it will be better received wearing that hat instead of my investor hat. 🙂

    Thanks for posting this.

    Carey

  • Kelly

    Thanks JP.
    I sent emails to Feinstein and Boxer.

  • Kelly

    Thanks JP.
    I sent emails to Feinstein and Boxer.

  • Mike

    I just contacted both my senators. If enough of us speak up it will be heard.

  • Mike

    I just contacted both my senators. If enough of us speak up it will be heard.

  • I think the H.R. 1728 Bill is referring to Banks and Mortgage companies – Lenders!

    I, and my Company do NOT lend money and are NOT under
    “… any other criteria the Federal banking agencies may prescribe;”

    Certainly ain’t “amortizing”; I have no “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;

    Anyways, “Wholesalers” have no worry whatsoever regarding this Bill… we don’t sell properties, we sell Contracts for a nice profit!

    ~ Royal T ~

    Hi Royal T,

    I respectfully disagree. It may not effect you directly since you don’t deal in owner financing right now, but any unjust, illogical piece of legislation like this that effects our industry should concern us.

    First, there’s the nobility of looking out for each other. If you see your fellow man being harmed, let’s agree that it’s best to help take up his cause as opposed to turning away simple because it’s not hurting us (yet).

    Second, there’s always a trickle-down effect to these things. For example, I’m sure this will effect some of the people you sell to as a wholesaler — and if it negatively effects them, it can effect you. It’s kind of like saying you don’t have to worry about the recession or economy at all b/c your income/vocation are perfectly secure (for now). But doesn’t it trickle down and effect all of us in some way to some extent? Even if you’re not the one laid off, in bankruptcy or in foreclosure? Gas prices go up, the gov’t continues seizing bigger and bigger pieces of America’s backbone, onward into Socialism we march…yes, it effects us all.

    And finally, just b/c you’re a wholesaler doesn’t mean you’ll never come across an exceptional wholesale deal that will involve (or at least could involve, if you think to ask for it) some owner financing. I was lucky enough to learn from a friend in 2006 that I should ALWAYS include an owner financed offer along with my cash offer when dealing with individual sellers. Cashing out is NOT always the most important thing to everyone…and passing along some sweet owner financing on a deal w/a nice interest rate and no balloon…well that can be a wholesaler’s dream.

    So…the morale is…I challenge you to see this a different way. It effects you. 🙂

    My best,

    …jp

  • I think the H.R. 1728 Bill is referring to Banks and Mortgage companies – Lenders!

    I, and my Company do NOT lend money and are NOT under
    “… any other criteria the Federal banking agencies may prescribe;”

    Certainly ain’t “amortizing”; I have no “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;

    Anyways, “Wholesalers” have no worry whatsoever regarding this Bill… we don’t sell properties, we sell Contracts for a nice profit!

    ~ Royal T ~

    Hi Royal T,

    I respectfully disagree. It may not effect you directly since you don’t deal in owner financing right now, but any unjust, illogical piece of legislation like this that effects our industry should concern us.

    First, there’s the nobility of looking out for each other. If you see your fellow man being harmed, let’s agree that it’s best to help take up his cause as opposed to turning away simple because it’s not hurting us (yet).

    Second, there’s always a trickle-down effect to these things. For example, I’m sure this will effect some of the people you sell to as a wholesaler — and if it negatively effects them, it can effect you. It’s kind of like saying you don’t have to worry about the recession or economy at all b/c your income/vocation are perfectly secure (for now). But doesn’t it trickle down and effect all of us in some way to some extent? Even if you’re not the one laid off, in bankruptcy or in foreclosure? Gas prices go up, the gov’t continues seizing bigger and bigger pieces of America’s backbone, onward into Socialism we march…yes, it effects us all.

    And finally, just b/c you’re a wholesaler doesn’t mean you’ll never come across an exceptional wholesale deal that will involve (or at least could involve, if you think to ask for it) some owner financing. I was lucky enough to learn from a friend in 2006 that I should ALWAYS include an owner financed offer along with my cash offer when dealing with individual sellers. Cashing out is NOT always the most important thing to everyone…and passing along some sweet owner financing on a deal w/a nice interest rate and no balloon…well that can be a wholesaler’s dream.

    So…the morale is…I challenge you to see this a different way. It effects you. 🙂

    My best,

    …jp

  • ANTHONY

    PLEASE FOLLOW UP ON THESE EVENTS. THANK YOU.

  • ANTHONY

    PLEASE FOLLOW UP ON THESE EVENTS. THANK YOU.

  • Mike C

    To try to ‘level the playing filed’ (which we need to do), consider trying to communicate with the local Board Of Realtors, or local newspapers (make a good story for them), or even radio stations.

    As I said, it’s all about mass exposure! Let’s go gettum!!!

    Mike

  • Mike C

    To try to ‘level the playing filed’ (which we need to do), consider trying to communicate with the local Board Of Realtors, or local newspapers (make a good story for them), or even radio stations.

    As I said, it’s all about mass exposure! Let’s go gettum!!!

    Mike

  • Al

    Thanks for the heads up! I received the same message from Peter Conti. As a Marine Corps officer (and real estate investor), I was able to write to both Nevada (permanent resident) and California (current resident) senators.

  • Al

    Thanks for the heads up! I received the same message from Peter Conti. As a Marine Corps officer (and real estate investor), I was able to write to both Nevada (permanent resident) and California (current resident) senators.

  • AJ

    I have heard from two different real estate attornies and both agree. This is much ado about nothing. If you are doing your business right, fair and moral, you will need a couple more pieses of paper signed. Thats all! I’ve included the body of an email from attorney Bill bronchick —

    [TRUNCATED]

    I hope this sets everyone’s mind more at ease.

    AJ

    Hi, AJ – thanks so much for your comment! For the sake of space, I edited out Bill’s remarks, but they were juicy indeed in response to the fanfare surrounding this bill.

    I’ve re-pasted them here in my follow-up post to this post. I invite everyone to read what Bill said in this post.

    Thanks again for your comment, AJ, and for pointing out Bill’s response.

    …jp

  • AJ

    I have heard from two different real estate attornies and both agree. This is much ado about nothing. If you are doing your business right, fair and moral, you will need a couple more pieses of paper signed. Thats all! I’ve included the body of an email from attorney Bill bronchick —

    [TRUNCATED]

    I hope this sets everyone’s mind more at ease.

    AJ

    Hi, AJ – thanks so much for your comment! For the sake of space, I edited out Bill’s remarks, but they were juicy indeed in response to the fanfare surrounding this bill.

    I’ve re-pasted them here in my follow-up post to this post. I invite everyone to read what Bill said in this post.

    Thanks again for your comment, AJ, and for pointing out Bill’s response.

    …jp

  • Soraya

    JP, thanks for the heads up – I just contacted both my senators.

  • Soraya

    JP, thanks for the heads up – I just contacted both my senators.

  • JP,

    Just read this from Bill Bronchick:

    [TRUNCATED]

    What are everyones feelings after reading that too?

    Carey

    Hi, Carey! Thanks so much for commenting. Just as I did with AJ (who also posted Bill’s email) I edited out Bill’s remarks for sake of space, but they’re well worth reading, as well as hearing the response from Vena Jones Cox and Peter Conti.

    Bill’s remarks and Vena/Peter’s response are all posted here in my follow-up post. I invite everyone to read and listen to what they said, and make up your own mind where you stand.

    Thanks again for commenting!

    …jp

  • JP,

    Just read this from Bill Bronchick:

    [TRUNCATED]

    What are everyones feelings after reading that too?

    Carey

    Hi, Carey! Thanks so much for commenting. Just as I did with AJ (who also posted Bill’s email) I edited out Bill’s remarks for sake of space, but they’re well worth reading, as well as hearing the response from Vena Jones Cox and Peter Conti.

    Bill’s remarks and Vena/Peter’s response are all posted here in my follow-up post. I invite everyone to read and listen to what they said, and make up your own mind where you stand.

    Thanks again for commenting!

    …jp

  • stephen moniz

    JP-

    Thank You for continually speak strongly on this issue. I can’t agree with you more on the point you made to Royal T. This is a BIG issue!
    And with the way things are going, this is a battle just beginning, if we think this is the only forced , big government, intrusive legislation coming down the pipeline to our new “change, ” get ready. We can dismiss it, as “it won’t affect us, or it’s nothing to worry about,” well, realize enough of these small battles lost, we wake up one day and realize we will have lost the war (that it has affected us and will be something to seriously worry about. We need to stand up NOW and hold our ground, not allowing them an inch so they won’t take a mile. I have emailed Fox News and other news stations supportive of our viewpoint, also Sean Hannity who had positive results with the property rights issues of Eminent Domain on his program.

  • stephen moniz

    JP-

    Thank You for continually speak strongly on this issue. I can’t agree with you more on the point you made to Royal T. This is a BIG issue!
    And with the way things are going, this is a battle just beginning, if we think this is the only forced , big government, intrusive legislation coming down the pipeline to our new “change, ” get ready. We can dismiss it, as “it won’t affect us, or it’s nothing to worry about,” well, realize enough of these small battles lost, we wake up one day and realize we will have lost the war (that it has affected us and will be something to seriously worry about. We need to stand up NOW and hold our ground, not allowing them an inch so they won’t take a mile. I have emailed Fox News and other news stations supportive of our viewpoint, also Sean Hannity who had positive results with the property rights issues of Eminent Domain on his program.