Subject To - Dodd Frank - Simple Scenario

[Kyle Cabral]

Hey guys, I'm really hoping for some simple advice on a simple scenario when discussing subject to deals with respect to Dodd Frank.  I downloaded the law, it's huge, and will eventually pierce through it but very congested so I figured I'd ask the question in this forum.

Scenario: I locate a house, let's say $150,000 ARV it has $35,000 in equity, needs no work, seller decides to get rid of it for $115,000. I decide to take over his mortgage subject to his original financing. I simply take over the deed/note, start making payments on behalf of the seller and have conditions/exit strategies in place just in case the due on sales clause (DOS) clause is exercised to prevent the original seller from facing a financial crisis if it defaults. (Either sell it, assign back to owner, etc)

Should I be concerned with any language in Dodd Frank? Or is this more of an issue with Lease Options where credits are being applied to the purchase price of the mortgage on the option to buy.

I was going through a ton of Dodd Frank forums and it was just all over the place so I figured to get very specific on a simple scenario to get feedback.

Thanks,
Kyle

[Liz Pineda]

Hi Kyle,

The only time when you need to be concerned about Dodd Frank  is upon selling the house. As of right now, there are no restrictions on BUYING a property as an investor using creative financing, such as subject-to's.

What the Dodd-Frank Act does is provide protection to a buyer who is being foreclosed or evicted after they bought a house using any type of creative financing (land contract, rent-to-own, owner financing, etc)

If in the future you are considering selling that house using owner financing, rent-to-own or a land contract; you need to follow these three criteria:

1. There should not be a  balloon in the note (meaning it must be fully-amortizing)
2. The interest rate is fixed for at least five years, and
3. You “qualify” your buyer.

Remember, you should consult with a qualified attorney in your state whenever you sell a house using any type of creative financing.

Let me know if you have additional questions.

Hope this helps :)

Liz P

www.lnlrealtygroup.com
[email protected]