All Forum Posts by: Brittany P.

@Chris Seveney

You had me laughing. I've had a "guru" tell me there's no need to send a 1098 under a certain dollar amount for a CFD. Now I just send the 1098 when the contract is paid in full so that the buyer can claim the full interest the year they pay off. Hope that's kosher…

Super helpful (even if it’s ChatGPT). Just wanted to make sure I’m not crazy thinking even vacant land might have to go through foreclosure auction.

Interesting. I assume that land sellers even in states like FL and GA still use CFD/land installment contracts. There must be a reason they're using CFD as opposed to DOT or mortgage and transferring deed to the buyer at closing. Maybe it's because CFD can be done without a title or escrow agent? Although if I were the buyer I'd still want a title/escrow agent if I'm investing in real estate...

So if you're right, I'm wondering what the advantage of CFD is. Even if you don't have to fight to get the deed back, you'd still be stuck with the contract until the foreclosure process is complete. Meaning you can't just turn around and get the parcel under a new contract...

Reaching out to all you note/CFD veterans again.

It's my understanding that in certain states, for delinquent/non-performing CFD's, you must go through a standard foreclosure process (once all other methods like forbearance and modification have been exhausted). In these states I assume that just like a standard foreclosure, all funds acquired during the sale that exceed the outstanding contract balance and any liens on the house go to the contract buyer (vendee?)--i.e., the person living in the property.

Let's assume I'm correct with the above (please set me straight if that's not the general case). What about for CFD's on vacant/unimproved land? There's no one (theoretically) living on the parcel--no improvements that would allow someone to make the parcel their residence. In the event of default/non-performance on a CFD for vacant land in one of the hypothetical "foreclosure" states I mention above, does the land parcel have to go to auction, with bidding starting at the unpaid principle balance of the contract (plus late fees, legal fees, etc.)? Or is it enough to give the buyer/vendee multiple notices, terminating with, "If the defect is not cured by XXXX date, the contract will be considered terminated"? If no one's living there, do you have to foreclose like in a CFD foreclosure state?

Hoping someone has some insight--thanks!

Thanks, Jamie. Super helpful.

Quote from @Jamie Bateman:

As others have indicated, it is typically the state licensing/compliance that becomes the focus in buying notes/CFDs. In general (not legal advice), in most states you **should** be okay to purchase notes without a license (if the loan was properly originated). There are definitely exceptions to what i just said. GA, for example, requires a mortgage lender license. Whether or not the state actually enforces that in all situations is another question. Using a licensed loan servicer protects you in many cases, as well. 

Sometimes when modifying a loan, if you are increasing the P+I, that could be considered a refinance, requiring you to re-underwrite (due to Dodd-Frank's requirement to show the borrower's ability to repay). 

In general, the NMLS should be your compliance/regulation guide, as it compiles tons of state-level requirements. Overall, I would say not to let the compliance piece scare you away. 

Thanks, Jamie. Do you happen to know if the seller-financing piece of Frank-Dodd applies to originating CFDs? My understanding is that if you’re not licensed, you can’t originate more than 3 seller-finances/year, and you have to make sure buyer can repay, fully amortizing, and restrictions on ARM. Do all these requirements carry over to CFD origination? (Confirming in advance that I understand any reply from you isn’t legal advice.)

Thanks, all.  Super helpful!

Hi All,

Question for you pros, and maybe I'm thinking too deeply on this, but does Dodd-Frank (or its attendant regulations) set any restrictions on purchasing mortgage notes, or only on loan origination?  What about any impositions on contract-for-deed purchases/origination?  Much thanks to anyone who can weigh in with their expertise.

Yup, good points.  We've been purchasing from land flippers, so some of those wouldn't be concerns for these particular transactions, but definitely as we move up in the note investing world and start purchasing notes for actual houses, all that makes sense.

Much thanks to you and @Jay Hinrichs. You raise some great considerations here.