On a recent CD of the month, I shared some information about the much-hyped Dodd-Frank Act which was passed as a direct result of the recent mortgage crisis. The Act takes steps to protect Americans from predatory lenders.
The Act as worried some land investors because it seems to put a cap on seller financing, requires loan providers to do credit checks and to fill out a pile of paperwork. But does the Dodd-Frank Act affect you?
According to section 1401 (Definitions) and point 5:
(5) Residential mortgage loan
The term residential mortgage loan means any consumer credit transaction that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or on residential real property that includes a dwelling
This Act is aimed at properties with a “dwelling”. So vacant land and commercial properties are not affected. But what about mobile homes and apartments buildings?
One lawyer in Arizona broke down the definition of “dwelling” this way:
“The Dodd-Frank Act provisions governing seller-financed transactions apply only to those consumer credit transactions secured by a dwelling, which is defined as “a residential structure that contains one to four units.” Consequently, sellers originating financing for raw land, commercial properties and other transactions not secured by a dwelling need not utilize Dodd-Frank Act compliant forms.”
So the Dodd-Frank Act is not a barrier to you doing your deals with vacant land, commercial properties, mobile homes, or apartment building with more than four units. The only way you might be affected is when working with my Flip it Fast Formula – but in that case you are the middleman between two parties – one of whom will pay cash to fund the deal. So even then the seller financing cap won’t affect you.