All Forum Posts by: Alfred Bell

I'm very unhappy to hear that Dodd/Frank, the SAFE Act, and who knows what else is in the works, is legislation originated from the banking lobby (in cahoots with the governement) aimed at knocking private and small lenders out of business. The banking system wants to control all lending activities in the country.

Oh oh... just saw this in the WSJ. Is this another threat as well?

[i]"Fed Extends Rules to Small Lenders:The Fed shocked bankers by approving a proposal that would force even the smallest lenders to comply with international bank-capital standards known as Basel III."

[b]Gulp! Are private lenders, trust deed investors, etc. in danger of becoming extinct?

Hey thanks for the support guys. Per your responses you make me feel like I'm making the right decision. Has anyone heard of George Antone? He wrote two books "The Wealthy Code" and "The Bankers Code". He runs classes to teach private lending and has a lot of techniques that bring high returns. I'm studying his materials now.

Note: I'm done with doing rehab/resells and dealing with properties. Too much hassle, effort and risk.

I want to "be the bank"... the guy that doesn't have to do all the work and take all the risks, but is the one who always gets paid first (as long as he remains conservative and follows the proper guidelines). I'm in the process of studying about private lending and liquidating some assets so that I have capital to lend (1st trust deed investing) through proven experienced hard money brokers.

Good nite and everybody have a fun weekend. Alfred

Lease it for 5 years? No way. This was discussed earlier. Not with the high chance of property values continuing to drop, either in quick spurts or slowly over the next few years. A 10-20% drop is pretty much a given with all of the foreclosures that will still be coming and a terrible outlook for the US economy over the next decade (unemployment continuing to rise, low to no growth, etc.) We need to get out while the getting is good.

There is no licensed entity that will underwrite this owner carry note for me. Enough research and attempts have told me that.

I'll find a proven, experienced RE attorney to check the creditworthiness of the buyer/borrower and write the note (and create a loan file), and the transaction will go through escrow like every other seller carry back that has been done. And I'll document it all as well as possible.

The only other question I have is whether a seller carryback note can have a prepayment penalty on it. The RE attorney will know or find out. Other than that it will just be going through the motions and handling whatever details arise in order to get to the end result. A good attorney and escrow officer will get me through this.

Finding a qualified buyer/borrower with out agent involvement (or with agent involvement if that is my only option) is my main and only real challenge as regards this project. If can't do that we'll be forced to make it a rental.

Thanks to everyone for all of your input. You've been a big help as far as giving me a starting point for how to structure the note.

I'll keep you posted on the outcome.

I've pretty much reached the conclusion that this isn't feasible. I've called direct lenders, loan servicing companies, brokers, etc. and they've given me contacts to call and I've followed up on those as well. (There are a few people who haven't called back yet and a few that are reaching out to have others call me, so there is still a chance that something might happen but from all of my conversations and what I've learned it doesn't seem realistic.) No one is going to underwrite this note for me. The basic reason is NO PROFIT/TOO MUCH RISK. The only thing that makes sense to them is that they would either have to be making the loan, or be a principal in the transaction, or make the loan and then sell the note to me... and none of them would even do that. And, none of that works for me.

I just talked to another guy who owns a private lending company and has 35 years in the business and is also well versed in buying and selling notes. He told me that if I do this through escrow and document everything, have an exper RE attorney draw up and bless the note, and have a service company service the loan and keep records for two years, that the note would be just as valid as if it was originated by a MLO.

He said that the precedent is a 1981 Calif Supreme Court finding that a seller carry back is an extension of the price of the property and is not a loan. As I learned earlier, technically, it isn't a loan it is an extension of credit. And Article 14 of Dodd/Frank, the SAFE Act, etc. will not have any bearing on this or cancel the validity of this note. A seller carryback note, written by attorney, recorded standard trust deed, lender policy and a decent loan file, seasoned for 2 years through a loan servicing company will hold its own and can be sold at a later date.

I really appreciate all the help and input from everyone but I think it has become pretty clear as to what path I need to take. I believe I'm being advised to do something that no one has actually done before. Can't waste any more time on this, I've got to go into motion.

I'll wait a day or two to hear back from the people I'm waiting on but after that, if nothing changes on this, I'm going the route of the escrow with RE attorney to put this seller carry back together.

I'll let you know how this turns out.

Ok Bill, got it.

I'm not having much luck today on my calls. No MLOs so far are willing to do this for me. It's either "we'd need to be a principle in the loan"... or "we'd have to assume liability for the loan and wouldn't do that"... "our company doesn't allow this, try and find a small mom and pop direct lender and maybe they'll do it".

I'll keep trying but if I can't get an MLO then I just have to assume it isn't feasible and I'll have to go the route of a standard owner carry back via escrow.

Thanks for the data and the link Dion. Will check it out today as I am in search mode now for someone who will underwrite this seller carry back. Soon as I have this in place I can put an ad in the Desert Sun and start marketing the property again.

Ad will be something like this...

"Beautiful, fully remodeled condo for sale. Excellent location in South Palm Desert. $270,000 asking price. No bank qualifying. Owner will carry. Own rather than rent."

Bill Gulley: Just to ensure that I understand what you wrote... what you are saying is with a seller carry back, if the borrower defaults we can foreclose on the property (we DEFINITELY have that right) but we can't seek any further judgements or go after other assets... all we can do is get the collateral back (which is the condo secured by the 1st trust deed) unless of course the condo sells at the trustee sale for our opening bid or higher. The main thing that I want to clarify is that altho this is a "seller carry back"/"extension of credit" and not technically a loan... we still have the right to foreclose if the terms of the promissory note are not met by the borrower. Correct?

Marc: I asked that agent and just got an email back that she will send me the contact info shortly as she doesn't have it to hand (turns out its been awhile since she did these seller financed deals).

Reason I talked to HMLs was because I didn't know who else to call and had to start somewhere. I found the NMLS website and also called the Calif Dept of Corps (who oversee the licensing) but no one has a list of MLOs. I have to search them out myself. Hopefully this agent and the HML/note investor I spoke with today will give me some names. Meanwhile I plan to call all lenders in the Coachella Valley to see if I can find someone to underwrite this note. I'll keep you posted. The saga continues.

Just spoke with a HML and note investor who has been in the business for 30 years. He agrees that this could all be done through escrow with no problem YET he confirms the advice that Bill, Marc and Dion have suggested... I must "CYA", must practice "be safe than sorry" and get this originated by a licensed individual. California's translation of the SAFE Act, or other legislation that the banking lobby manages to get passed in this area, could change the dynamics some years down the road and have a negative effect on my "escrow originated note". I need a person with a NMLO license (National Mortgage Lender Originator). He is going to try and hook me up with one and it should only cost a few hundred bucks. At least I have a better idea of what I'm looking for now.

As an aside, he told me that the powerful banking lobby got the SAFE Act put through with hardly anyone even reading it. They will continue to work on passing laws of this nature because they want to stop all private lending so as to control it all.