| "The Secure and Fair Enforcement Mortgage | | | | The contract is the law among the parties. A property |
| Licensing Act of 2008 (SAFE Act), as a key | | | | owner has the right to sell his or her property, including |
| component of the Housing and Economic Recovery | | | | seller-financing to enable a buyer short on cash to |
| Act of 2008 (Pub.L.110-289) enacted into law on July | | | | consummate the sale. |
| 30, 2008, directs all States to adopt licensing and | | | | Seller-financing likewise enables a seller to sell his or |
| registration systems for loan originators that comply | | | | her properties faster, and earn income during the |
| with the minimum standards set by the SAFE Act. | | | | duration of the promissory note being financed. |
| The Department of Housing and Urban Development | | | | The proposed Rule would impair obligations of existing |
| (HUD) is charged by the SAFE Act with establishing | | | | contracts in cases involving contracts to sell with |
| and implementing a system for mortgage loan | | | | seller-financing, lease with option to buy with |
| originators in States that do not meet the minimum | | | | seller-financing, and other similar contracts. |
| requirements of the statute. So, HUD published its | | | | Proposed Rule ยง3400.13 Requires Individuals To Be |
| proposed Rule on the minimum standards under the | | | | Licensed By States With Exemptions: |
| SAFE ACT that States need to comply with in | | | | 3400.13(e) of the proposed Rule provides that a State |
| licensing loan originators, procedures and actions, as | | | | is not required to impose the prohibitions: (a) from |
| well as its enforcement authority in the Federal | | | | "engaging in the business of a loan originator with |
| Register, Vol. 74, No. 239, December 15, 2009. | | | | respect to any dwelling or residential real estate in the |
| Moreover, HUD proposes "to clarify or interpret certain | | | | State, unless the individual first registers and obtains |
| statutory provisions that pertain to the scope of the | | | | and maintains a valid loan originators license for the |
| SAFE Act licensing requirements, and other | | | | State; and (d) complies with the same requirements in |
| requirements that pertain to the implementation, | | | | the case of an independent contracts engaging in |
| oversight, and enforcement responsibilities of the | | | | residential mortgage loan origination, if: "(4) an individual |
| States." | | | | who offers or negotiates terms of a residential |
| The HUD proposed Rule, if codified as a Final Rule or | | | | mortgage loan with or on behalf of an immediate |
| regulation, would eliminate the business strategy of | | | | family member of the individual; and (5) any individual |
| acquiring and reselling properties through seller financing | | | | who only offers or negotiates terms of a residential |
| without being licensed as a loan originator, unless: (1.) an | | | | mortgage loan secured by a dwelling that served as |
| individual offers or negotiates terms of a residential | | | | the individual's residence."....(underscoring supplied) |
| mortgage loan with or on behalf of a member of his or | | | | Loopholes To Proposed Rule: |
| her immediate family; or (2.) an individual seller provides | | | | A loophole to the proposed Rule is for the seller, who |
| financing to a buyer pursuant to the sale of the seller's | | | | is amenable to seller financing of a residential income |
| own residence. | | | | property, to hire the services of a licensed loan |
| Proposed Rule Prohibiting Seller Financing Deprives | | | | originator to offer or negotiate terms of a residential |
| Owners Of Property Rights Under The 14TH | | | | mortgage loan to a prospective buyer. |
| Amendment: | | | | Another loophole is to retain "a licensed attorney who |
| One of the cherished rights of U.S. citizens is property | | | | only negotiates the terms of a residential mortgage |
| rights protected by the 14th Amendment of the | | | | loan on behalf of a client as an ancillary matter to the |
| Constitution from any state action without due process | | | | attorney's representation of the client," and who is not |
| of law, which allows owners to dispose of their | | | | "compensated by a lender, a mortgage broker, or |
| properties in any way they see fit. | | | | other mortgage loan originator or by any agent" |
| One of their property rights is to sell their properties | | | | thereof, pursuant to 3400.13(e)(6) of the proposed |
| through seller financing to assist buyers who cannot | | | | Rule. |
| qualify for bank loans. The usury provision (Article 15) | | | | Conclusion: |
| of the California Constitution prohibits loan-shaking | | | | The proposed Rule, prohibiting seller-financing without |
| activities, charging in excess of 10 percent per annum, | | | | loan originator license except for family or one's own |
| unless exempted by a finance lender's license. | | | | residence, should not be codified into regulation |
| Requiring owners of residential income properties to be | | | | because it deprives owners of their property rights to |
| licensed as loan originators in order to sell such | | | | indulge in seller-financing, and it impairs obligations of |
| properties through seller-financing directly to buyers | | | | existing contracts. |
| interferes with property rights of owners. | | | | If it is found to be within the constitutional rule-making |
| The proposed Rule seeks to eliminate property rights | | | | power of the Congress delegated to HUD, and not an |
| exercised by property owners through centuries in | | | | over-reaching regulation beyond the scope of the |
| favor of more regulations and of banks at the | | | | SAFE Act, the loopholes of hiring a licensed loan |
| expense of home buyers with bad credit. | | | | originator or licensed attorney are available to owners |
| Proposed Rule Impairs Obligations Of Existing | | | | willing to do seller-financing. |
| Contracts Protected By The Constitution: | | | | |