SAFE ACT 3 sale exclusion?

Came across this Q & A article excerpt - has anyone seen or heard of this? It might help some of the small operators who only do a few sales a year to stay in compliance:Does that mean that no loans can be made to borrowers by those
without a mortgage origination license if the borrower plans to use the
property for personal, family, or household purposes?

No - certain exceptions were written into the Dodd-Frank rules for
sellers who wish to fund the purchase of their property with owner
financing. The seller financer is not treated as a “loan originator” if
the seller meets certain criteria associated with the sale and finance
of a limited number of properties in a 12-month period. The initial
exceptions that were originally laid out in Dodd-Frank were modified by
the Consumer Financial Protection Bureau during 2013 after receipt of
public comments, so sellers need to be sure they are operating from the
most current CFPB regulations.

Three-Property Exclusion

The first available exclusion is for sellers who finance the purchase
of three (3) or fewer properties in a 12-month period. In order to
qualify for the exclusion and make the loan, the following
qualifications must be met:

The seller provides financing for the sale of three or
fewer properties in any 12-month period. The property must have been
owned by the seller and serve as security for the loan. Note that for
this exclusion, the seller may include individual sellers, as well as
businesses, trusts, and other entities.
The seller did not construct, or act as a contractor
in the construction of, the residence in the ordinary course of their
business. This element means that builders or contractors who are in
the business of constructing homes do not qualify for the three-property
seller finance exclusion.
The terms of the loan offered must meet the following requirements:

First, the loan must be fully amortizing.
That means that the loan must be fully paid off over a set term.
Balloon payments are not permitted. Negatively amortizing terms are
also not permitted, where monthly payments do not cover the full amount
of interest due and unpaid interest is added to the principal balance of
the loan.

Second, the person must determine in good faith that the consumer has a reasonable ability to repay.
The following “ability to repay” factors for non-exempt residential
loans could be taken into consideration when determining the borrower’s
ability to make payments: (1) current or reasonably expected income or
assets; (2) current employment status; (3) the monthly payment on the
proposed loan; (4) the monthly payment on any simultaneous loan; (5) the
monthly payment for mortgage-related obligations; (6) current debt
obligations, alimony, and child support; (7) the monthly debt-to-income
ratio or residual income; and (8) credit history. While seller
financers are not required to formally document how they made the good
faith ability-to-repay determination, prudent sellers should keep
records in case their analysis is ever called into question.
Third, the loan must have a fixed interest rate or an adjustable interest rate that remains fixed for at least five years.
If the rate adjusts, it must be tied to a widely-available index such
as indices for U.S. Treasury securities or LIBOR. Any annual or
lifetime interest rate adjustments must also be reasonable. The CFPB
has stated that an annual interest rate increase of two percentage (2%)
points or less is reasonable, and a lifetime limitation of an increase
of six percentage (6%) points or less is reasonable.

Bret, thank you for posting.In addition to the Dodd-Frank rules a person would also need to check their ‘State Rules’ concerning the amount of Mobile Homes that a person can sell in specific state before they need to be Licensed as a Mobile Home Dealer.This ‘State Rules’ number might be less than the Frank-Dodd number.

Item #2 is going to kill you – the Ability to Repay rule. Basically, if the tenant stops paying, they can sue you and claim you did not do enough diligence to determine that they would not be able to pay you, so it’s essentially your fault. In addition, the law allows them to sue you for damages. It’s basically a trap.