All Forum Posts by: Alfred Bell

Spoke with a local small lender in Palm Desert and he said he couldn't/wouldn't originate the loan and that I'd have to search for some small lender who might be willing to do it but it doesn't seem too realistic.

Also, just spoke with a hard money lender here in Palm Desert (Pacific Mortgage Exchange). They told me that they could not originate a loan unless they were a principle in the loan transaction.

I was also told that here in California technically what I want to do is not considered a loan... it is a "seller carry back", not a loan. This is done through escrow and as long as there is a valid and properly done promissory note, trust deed and lender's title insurance policy, that there would be no problem selling the note at a later date.

I'm waiting to hear back from another HML in order to get his feedback on this subject. I'm searching for other small lenders to call for feedback as well to get to the bottom of this.

Marc: Yes, of course I will check with professionals on this. No way I would go forward without having this last aspect fully understood. I should have a good grip on it within a day or two and then be ready to go into action. Finally. Thanks everyone for your input thus far.
Alfred

Bill Gulley:
Thanks for your input and concern on this point.
This point is the thorn in my shoe. I've started to research this now so as to find out if and how this can work. The question is... Will I be able to find a licensed loan originator to do this for me? If not, it will have to be a DIY job. If I can find someone who will do it, I will need to find out exactly how this will work. What doesn't make sense to me about this is that the licensed originator's requirements could be exactly what a bank's requirements would be so how could I advertise or tell a prospective buyer that I'm offering "owner financing, no bank qualifying" when in fact it will wind up being the same thing?! This has been my confusion all along. But I will sort it out soon enough and know whether I'm going LMO or DIY.

Dion:

Thanks for the input.

Good to know that lender's policy will transfer to next note buyer. (I'll ensure that I go over this with escrow to ensure getting the correct type of policy and that it will convey.)

I am definitely concerned about my investor. I'm doing everything that I can to ensure this works out and he gets all of his capital back (and a profit if he is willing to hold the note for a longer period of time). Luckily for me he is easy going and not upset about this strategy to sell for a lower/marketable price and carry paper for a few years in order to recoup his losses. I want to get him the best interest rate that I can but there has to be a balance between his needs and the buyer's needs. (I talked with a local broker today and she told me that she is having some of her listing clients carry paper too in order to facilitate a sale. I told her I was thinking about asking for 20% down and 9% for 8 year term, amortized at 30 years and she said that it sounded good except that the 9% might be too high. She said hard money lenders are doing 8% locally. So... I'm gonna verify this by calling HMLs in the area. This data will then help me to get the highest interest rate feasible yet stay within the market.)

I won't market my loan through public media. That is private between me and the condo buyer.

I think I'll go with Marc's advice on the language. I believe it will be better to say... " would like 50k down, the payments would be approximately $1,400 per month, which is about what these units are renting for" and then go over the details with him as we move forward... as opposed to "want 20% down and 9% interest". This is not a problem I can handle this, altho using the best language will make things go smoother.

If I get a lender's title policy when I do the owner carry, can I transfer or assign it to whoever buys the note from me?

I know that I will most likely wind up having to negotiate this point, and I know that each prospective buyer/borrower will have different circumstances and capabilities, but, in general... 9% seems to be such a HIGH percentage rate (especially now with rates at 3.5%)... should I really try for a 9% interest rate?

(Maybe 9% isn't really so outrageous since, amortized for 30 years, 200k @ 9% = $1,609.25 and 200k @ 7.5% = $1,398.43. Which is only $200 more per month or $2,400 more per year.)

Also, in relation to the above question... would it be best to avoid announcing percentage numbers for DP and interest, and just negotiate with the prospect using the money numbers, such as... "we'd like a $50,000 down payment and we'd like a monthly payment of around $1,600"?

Marc:
No problem with that, and I understand. I could have them sign a doc that authorizes me to have and keep their credit report in my loan file. I could have them go online and order and pay for a credit report and FICO and then submit it to me.

But before going that route I want to finalize this major uncertainty of me doing this versus an originator handling the loan cycle.

Ok, Bill thanks.

One final clarification... exactly what is meant by mortgage originator? Is this just any lender for residential property? Some small local mortgage company? A hard money lender?

I want to make sure I understand who/what I'm looking for to talk to and how and where I'm gonna find someone who will be able to help me with this.

Thanks.

Bill: Please help me with this...

So I first need to determine if I (a guy selling a condo with owner financing as a one time only action) fall under the SAFE Act or not, right?

Secondly, how is this "owner financing" if there is a mortgage originator who makes all the decisions?

Marc,
I just asked Bill Gulley to respond to this and that should help clarify things.

This is really the only remaining issue that I need to sort out before I can go into action on this. Basically... "Am I going to have to be the one that checks the buyer/borrower's creditworthiness OR can I have some 3rd party do this so it is more legitimate and I'm not violating privacy laws or executing lending actions without a license?"