How to find MLO to originate seller financed loans

Question

With Dodd-Frank in effect.... has anyone found a loan officer who will/can originate loan docs for seller-financed loan? Our go-to mortgage officer isn't allowed to; he's at a mortgage company. Willing to give me templates to use but I'm almost certain I need him to generate the entire loan packet.

I am looking for one in the Seattle area.

If you've found someone outside of WA state, would you please share how you went about finding someone and elaborating what they are preparing for you?

I haven't had much luck asking around at local REIAs.

Thanks!

Bob E. · Answer

Joe, Class was in Arizona, our laws may be a little different here but DF is not a local law and this class was specifically of DF for RE licensing credits, taught by a local RE attorney.  I have seen the same information in other places and will stand by this until I am presented with different data by a reputable source.

That said I would still recommend using a LMO to make sure you get all the documentation necessary to smoothly resell the note in the future.

Other states may have laws in addition to DF so actual milage may vary.

Bill Gulley · Answer

Bob, totally disagree and I believe the attorney who suggests this, is missing the SAFE Act portion that stipulates any system or method utilized with the intent to circumvent the intent of the law will be subject to the Act. There is also the theory of who is really behind the door, you also have issues of related parties, marital interests and comingling of assets.

If I were the regulator, I would not buy it. Regulators go through an administrative process in issuing orders to cease and desist and levy administrative fines, HUD can bar you from dealing in many aspects of housing and they can put you out of business without ever being in a court room. Attorneys who do not specialize in administrative law with agencies may miss that it's not like court sometimes.

Another guru attorney tells folks basically, "hey the didn't make their payments, to get you they have to sue, that means getting an attorney....if they can afford an attorney and go after you, why didn't they just make the payment"?  Well. he's wrong too, the CFPB has a phone line for reporting, reports can be made by anyone, your neighbor can report a violation. The borrower has documented evidence. So, it boils down to, can your borrower afford a few phone calls and some postage stamps, they won't need an attorney, and that's why we have prosecutors.

Don't try to out smart the system in place, many have tried and some are wearing orange jump suits. In reality, I'd be more concerned about the hefty fines and being black listed from RE, granted, you'd really have to mess up to wear orange, but life could change for you doing a lot less. :)

Dawn Young · Answer

Hi, all, any updates on this topic, now that its been a year?

Account Closed · Answer

My understanding of the exemptions is similar to yours.  One deal per year if you are a person or estate with no LMO requirements and no ATR requirements.  3 deals per year for corps and entities with no LMO requirement but still need to do ATR.  The ATR requirement doesn't seem onerous to me. Plus you'd want that in the file if you want to re-sell the note. I don't do balloons so I ignored all the details about which transactions allow them.

Seems like between me and my adult children and my husband we have enough exemptions per year for notes we want to hold long term. If I run out of exemptions, that means business is really good.

Account Closed · Answer

@Angel Prentiss  Honestly, I'm not sure you're going to find someone until there is more clarification from the CPFB about using LMOs in seller financed deals. The laws state you can't even negotiate or offer the loan if you aren't an LMO.  So, that brings up all kinds of problems and issues with just advertising and negotiating the purchase price in a seller financed deal.

I found one local hml lender/broker that said he would do it for 4 points and charge it to the borrower. He claimed he was "taking all the risk".  At that point I knew I was talking to someone that I wouldn't be working with. Since when does the loan originator take all the risk?  Last I checked lenders are on the hook for loans they make no matter who created the application and file.

This topic has come up plenty here and I'm not hearing from anyone offering to do the originations. After DF passed a lot of people kept repeating "use an LMO" like a mantra.  But there don't seem to be any volunteers.

Please keep us posted about what you discover.

Jay Hinrichs · Answer

@Bob Estler

Bob not true in all states.. In Oregon any financing of a 1 to 4 unit is covered by dodd frank..... although if it is investor to investor the paper work is minimal but you still need an NMLS license.

I believe AZ is the same way .. At least that's what I have been told

State of WA  were I have an office does not require the license in the scenario you describe.

Bill Gulley · Answer

Yes Bob, and he called me for advice as he was getting started. You're new, you'll learn more here. Just understand, when the stuff hits the fan, they aren't liable for what you do. You don't have an attorney client relationship and you'll be hard pressed to find another attorney to seek any damages from another attorney. Some call it a license to steal, I know another attorney who has over a decade left on his sentence, but that was a different issue.

Clint does have some good stuff, but being a past regulator, I'd disagree with him on that ploy. Time will tell won't it. Read the Act for yourself. Good luck :)

Account Closed · Answer

Bob,

Can you post the lawyers name and state that taught the class?

Joe Gore

Bob E. · Answer

Feel free to disagree but I just attended a local class taught by and attorney and this is what he was teaching.  I also have this from a few other sources as well.

Bob E. · Answer

One important note:  DF does not apply if selling to investors, so if you are selling to an investor you have no concerns.

If you are not selling to an investors my understanding is that there is one exempt transaction allowed per year per INDIVIDUAL.  If your property is in an LLC no exemption, so transfer it out.  If it is held by two people both would lose their exemption for the next 12 months so for married people it might make sense to move a property to only one persons name if you think you might have another sale within 12 months.

If you still want or need an MLO I would call RE agents that are offering SF and see who they are using.  I know there is one MLO here in Phoenix who will do these for $500 or so.  Cant recall their name right now and it probably would not help you much since you are in Washington.

How to find MLO to originate seller financed loans

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