“To exempt small seller financers from certain licensing requirements.”
No CRS summary available for this bill.
This section states congressional findings regarding real-estate owner financing, defining it as a transaction in which a property owner provides financing to a buyer who makes a down payment, receives the deed or title, and repays in installments as an alternative to bank loans. The section further finds that the industry consists of small business owners serving underserved buyers under state real estate and consumer protection laws (including ability-to-repay, deceptive trade practices, and usury laws) as well as state and federal fair housing laws; that it benefits home values, neighborhood stabilization, and family wealth creation through increased homeownership; and that none of the Act's amendments apply to unrecorded contracts for deed or land installment contracts, lease options, leases with option to buy, or rent-to-own transactions.
This section establishes an exception to the loan originator licensing and registration requirements of the S.A.F.E. Mortgage Licensing Act of 2008 for any person (other than a depository institution) who (1) extends credit with respect to not more than 24 residential mortgage loans in a 12-month period and (2) only extends such credit secured by property owned by that person. (Thus, seller-financed transactions by property owners are exempt from these requirements if limited to 24 per year.)
This section expands exceptions from the definition of mortgage originator to exclude (1) persons or entities providing owner financing for the sale of up to 24 residential properties in a 12-month period, where each property is owned by the seller, serves as loan security, is not provided by an entity that constructed or acted as general contractor for a residence on the property in the ordinary course of business, the loan is fully amortizing with a fixed rate or adjustable rate adjustable after five years subject to reasonable annual and lifetime rate increase limits, the owner documents the buyer's reasonable ability to repay, and the loan meets any additional Bureau criteria; and (2) similar owner-financed consumer loans secured by manufactured homes owned by the seller, excluding loans by the home's manufacturer and subject to the same amortization, ability-to-repay documentation, rate, and Bureau criteria requirements. (Thus, qualifying owner-financers are exempt from Truth in Lending Act rules applicable to mortgage originators, such as ability-to-repay requirements and compensation restrictions.)
This section directs the Secretaries of Housing and Urban Development and the Treasury to jointly conduct a study on (1) the number of homes purchased in the United States for under $150,000 or 60% of the median home value in a given community (whichever is lower) using owner financing, (2) the number of such homes financed by licensed mortgage brokers, (3) the potential number of such homes that could be sold but are not because owner financiers are unwilling or unable to comply with mortgage broker rules, and (4) the potential benefits to home values and wealth creation from increased owner-financed sales. Not later than one year after enactment, the Secretaries must issue a report to the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs containing all study findings and data on owner-financed transactions from 5, 10, 15, and 20 years prior.