Originally posted by @Dion DePaoli:
Originally posted by @Troy Michaels:
im totally new to all this, but, how i look at it is this: if you are going to do a lot of owner financing, you should use a mortgage originator. the problem, and the REASON dodd frank was put into place is to keep you from being able to finance people with poor credit. i initially didnt like the idea, but the more i think about it, its a good idea because it shifts the liability more onto the mlo if the buyer defaults down the road. if the mlo qualifies your buyer, how can you be held liable if the buyer defaults? thats why the mlo is BONDED..
There are a couple billion dollar mortgage settlements that would lead us to believe that the law may not pass all liability onto the MLO and absolve the Mortgagee based on MLO actions. The basis there, it has not been explicitly stated, therefore there is not explicit additional actions required to accommodate those types of liabilities on a state level within the SAFE Act.
The short version, 'Lenders' are treated differently in some states. There is a requirement for financial safe gaurds in the form of insurance, bonds and net worth requirements. Based on that idea, I think there is a limited liability to the MLO and still the majority will be the burden of the Mortgagee. An MLO could come and go in the industry over the course of 5 years but the loan made will still exist and your loan would still be present (with you as a Mortgagee). We do not understand how that will work outside of how it has worked in the past. Pre Dobb Frank and all of it's new rules.
I don't have enough time to dig in to that idea more for readers today. Might be able to loop back unless another BP member adds some commentary around the same. My short version, I would say do not bet that any Mortgagee is absolved from liability in full. I really do not see how that would be possible or make a ton of sense.
lets take a investor out of the picture. lets say a homeowner sells their house, to a buyer, that is using a financial institution, thru a mortgage loan originator. the buyer later defaults. under the reasoning above, the buyer COULD in theory, go after the seller of the house, for liability, but instead, have been sueing the banks. thats what im reading here. im with you, just this is my take on what you posted.
