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As I've mentioned before, seller financing---a great win-win situation for both sellers and buyers---is making a comeback in the current real estate market. However, I've recently read about legislation that will restrict seller financing and possibly hurt consumers, investors, and small businesses.

The bill in question is HR 1728, and its aim is to curb the predatory lending practices of the early 2000s and the resulting subprime mortgage "meltdown" by imposing strict regulations on mortgage industry servicers.

Why would this bill have a drastic effect on seller financing? Embedded in the text of the bill is a definition of a licensed mortgage originator---and that definition does not exempt a seller who finances the sale of his or her property. So that seller must abide by the new legislation---even though a seller-financed note is intrinsically different than a note originated by state-licensed mortgage originators who are bound by their state's law. Licensed mortgage originators have to be bonded and insured, have a certain amount of experience, and are required to complete continuing education requirements or risk losing their license.

Now, this new legislation will allow you to sell one property every three years using seller-financed methods, but anything more would be illegal. Unless the definition of a licensed mortgage originator is changed, I am concerned about the effect this will have on investors who depend on seller financing to close lucrative deals.  

There are many articles that have discussed HR 1728, but here is a good article that gives an in-depth at the bill, and tells who's coming out against the bill and what you can do to help.

I feel that this is an important piece of legislation, and I encourage you to educate yourself on the issues and how they could possibly affect you.

Have you ever seller-financed a property? How about purchased one where the seller financed all or part of the purchase? I'm looking forward to hearing from you.