California NoteBuyer LLC                              August 2014                      Do You Know the Rules? As of January 10, 2014, the Consumer Financial Protection Bureau(CFPB) issued new regulations that apply to Seller- Carryback transactions. What you may not know - but need to know - is that one man, Ric Thom, owner of Security Escrow in Albuquerque, New Mexico has been talking to and negotiating with CFPB on behalf of all of us who care about the world of Seller-Carryback. Prior to Ric's involvement, CFPB lumped our transactions in with those of major bank lenders, the bad guys that caused the crisis that led to people getting mortgages they shouldn't have. So, you and I would have to become a Mortgage Loan Originator, get licensed, and function under the exact same rules as mortgage lenders. Bottom line, CFPB did not understand our business, and how it was different. Ric explained it to them and the rules changed for Seller-Carryback. So, here is a brief summary I am taking from Ric's report on rules we need to know to stay on the straight and narrow. The One Per Year Rule The CFPB distinguished between sellers who did one transaction per year and those who did more than one per year. So, if you are an individual, a trust or an estate, and you do just one seller carry-back transaction in a calendar year on a property that the buyer will use as their primary residence, then: 1. Your note may have a balloon 2. You do not have to prove or document your buyer's ability to pay. 3. The note must have a fixed interest rate for five years. After the 5th year, the interest rate can increase no more than 2 points per year with a cap of 6 points above whatever you started at. You have to use an index like a T-bill or prime rate in the beginning. Follow these rules and you do not have to become a Mortgage Loan Originator. If the buyer is not going to live in the property, these rules do not apply. If you sell a commercial building or apartment building, or land, these rules do not apply. If you are a Corporation, LLC, Partnership or other legal entity, these rules do not apply. Most people may do one owner-carry-back in their lifetime. So, these rules are not a big change for most people. Again, these rules apply only to a property being sold where the buyer will live in the property and the seller will have a 1st position note secured by the property. The More Than One Per Year Rule The second category applies to individuals, trusts and estates that do more than one owner-carry-back transaction per year when the buyer will use the property as his primary residence. It also applies to any owner-carry-back transaction - even one- where the seller is a Corporation, LLC, Partnership or other legal entity when the buyer will use the property as his primary residence. The rules are: 1. The note cannot have a balloon. 2. The note must have a fixed interest rate for five years. Same as #3 above. 3. The seller must determine the buyer's ability to repay. 4. If the seller does 3 or less transactions per year, he does not have to become a Mortgage Loan Originator(MLO). 5. If the seller does more than 3 transactions per year, he must become a MLO. Again, these rules apply only where the buyer will use the property as his primary residence. Evidently, there are no set guidelines to determine "ability to repay" if you fall into category 2. Common sense and prudence should guide you. What kind of work does the buyer do? What is his income? Can you request a copy of a pay stub? If he was renting previously, how much was his rent? Is the relationship between his income and note payment reasonable? Do you have the guts to ask for a copy of his tax return? Be prudent. Document your file. Protect yourself. Want to get involved in helping to save our business? Please visit www.savesellerfinancing.org. You can sign the petition, be anonymous if you choose, and donate to the cause. Don't be bashful! Always look at what you have left - never look at what you have lost ........   Rev. Robert H. Schuller.                        Lenders Are Owners - Owners Are Money Renters If you like history, or a historical perspective on owning property in America, you may find this article interesting: "Money Rentership: Housing and the New American Dream". go to www.ochousingnews.com/blog/money-rentership-housing-new-american-dream-redux. Check it out.                              Bank of America - Always in the News My favorite bank - and yours, perhaps - is in the news again. B of A has tentatively agreed to pay close to 17 billion dollars to settle court claims related to 245 billion dollars in soured home loans. This would bring to almost 22 billion dollars in total settlements - the largest amount in American history paid by a single entity( Los Angeles Times, August 7, 2014). Plus, B of A had an additional 60 Billion dollars in losses and legal costs related to its acquisition of Countrywide Financial. By the way, if you get unsolicited credit card offers, etc. in the mail, you can opt out and stop them from coming to your mailbox - for 5 years anyway. Visit www.OptOut Prescreen.com. You will have to submit a signed form to opt out permanently. Interesting what we have to do to not get something we never requested in the first place!                           Mortgage Closing Costs on the Rise According to Bankrate.com, mortgage closing costs jumped 6% nationally over the last year. The average closing costs for a $200,000 loan hit $2539 in June, up from $2402 a year earlier. New mortgage regulations, especially the ability to repay provision we discussed earlier, are the culprits, Bankrate says. Fees are highest in Texas, averaging $3046 for a $200,000 loan. The nation as a whole averages about $2500. "Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity." ..... Martin Luther King, Jr. In the 2nd quarter, 2014, California had 12,826 homes sold for 1 Million Dollars+.....  CoreLogicDataQuick. The average checking account balance for U.S. consumers at the end of 2013 was $4,436. 25 years ago, the average balance was $2,100. At the end of 2007, the average balance was $788......Moebs Services Inc.                              Homeownership Rate Drops The U.S. Commerce Department reported last month that just 64.8% of us are owner-occupants. This is the lowest level since 1995. Homeownership peaked in 2004 at 69.4%. Who had the lowest rate of any big metropolitan area? You guessed it, Los Angeles and Orange counties in my beloved state of California - 49.1%. "Too soon too old - too late too smart." ...... German saying.                             Mortgage Lending Perking Up? The Mortgage Bankers Association reported in June that home lending hit a 14 year low for the 1st quarter. Now, they are estimating about $1 trillion dollars in mortgages for the year, with 58% representing money purchase loans and refinanced loans slipping down to 42%. The refinance share last year was 63%. Mortgage lending peaked at $3.9 trillion dollars in 2003. So, in the span of only 14 years, we have experienced a lending gap of almost $3 trillion dollars. This is astounding to me. Do you see opportunity?? How many potential homebuyers does that $3 trillion dollars represent? I have no idea, but if you follow the rules I have outlined today, and be prudent with your buyer, you can give someone the chance to buy a home in our country. Try it. As always, if you like this Newsletter, pass it to a friend. If I can make it better, tell me how. Thanks for reading. Denny Stanz, Note Broker CA #01915404 760-245-5366 760-245-5367 fax www.CaliforniaNoteBuyerLLC.com dennystanz@verizon.net