Balloon Mortgage

[Frank Cain]

I have a lead on a potential deal where the owner-occupier has a balloon mortgage set to burst in the next few months. I dont know the current rate or the balloon rate. Essentially, the owner has an imperfect credit score, but stable income. She would like to stay in the house if she can.

The owner/seller wants to possibly:

1 - sell the house and rent it from the buyer

2 - sell the house to a buyer, and then buy it back subject to new owner financing

3 - do a more amazingly creative idea brought up by this forum discussion

I have a few questions about possibility #2. First, is that legal? Second, what would incentivize a buyer to do a deal like that instead of #1?

I am vaguely aware that balloon mortgages are dying due to the new Consumer Protection Act that Senator Warren set up. Are there any new types of loans from this "wealth redistribution administration" that the owner could take advantage of, avoiding the sale of the house? Is there a way for a wholesaler or bird dog to profit from the new loan being made for the owner?

All comments are welcome, especially from legal minds like Bill Gulley and experienced investors like Wayne Brooks, Karen Rittenhouse and the like. I am new to BiggerPockets and REI and apologize in advance if this question is not technically accurate. I still have a lot of homework to do.