Seller Financing Exemptions

Some of my most popular articles and blogs have to do with the rules and regulations around seller financing. Many notable changes occurred as a result of the passage of the Dodd Frank Act in 2010.

Financing the sale of residential real estate is regulated at both the state and federal levels. In Washington the Consumer Loan Act, chapter RCW 31.04(link is external) and chapter WAC 208-620(link is external), regulates the lending of money or extension of credit for family, personal, or household use. This includes financing residential mortgages. Regulation under the Consumer Loan Act begins with the licensing process. Licensing is twofold in that both companies and individual mortgage loan originators must license.

There are some exemptions from licensing at both the company and individual levels. The company level exemptions are found at RCW 31.04.025. The individual level exemptions are found at WAC 208-620-105(link is external).

A license waiver is available pursuant to RCW 31.04.025(3) for eligible transactions under the Consumer Loan Act. The State Department of Financial Institutions (DFI) will issue a license waiver for eligible seller-financed residential mortgage loan transactions. An eligible transaction is one in which the seller owns the property being sold, is selling to a buyer for their family, personal or household use, is carrying the financing taking an interest in the property, and who is not subject to the federal law that requires the licensing of mortgage loan originators.

You may qualify for an outright exemption from the Consumer Loan Act. If you sell the home that was your primary residence and carry the financing for the sale, you are exempt from the Consumer Loan Act. You do not need a license or a license waiver. Also, you do not need a license or license waiver to lend money, secured or unsecured, to an immediate family member. 

Additionally, you do not need a license waiver if you are carrying the financing on raw land, even if that raw land is zoned residential. 

 DFI provides forms for a license waiver,  and disclosure summary forms to provide to the buyer for the type of seller-financed loan (fixed or variable rate interest).

Steps to claim an exemption for Seller Financing are as follows: 

1. Print the License Waiver
2. Fill out the license waiver, including the declaratory portion at the bottom, and return it to the Department via email to Lucinda.Fazio@dfi.wa.gov, via fax to the attention of Cindy Fazio at 360-596-3868, or via hard copy to the Department to the attention of Cindy Fazio. You can now provide the completed License Waiver to the escrow or title company or attorney.
3. As to Item No. 1 in the License Waiver, print, fill out and provide the applicable disclosure summary to the borrower. That's it!

More details may be found on the DFI website at http://www.dfi.wa.gov/residential-seller-financing

Happy Investing! 

Best Blogs of 2014

Happy New Year!

Here are the Top Ten most popular blogs from this Seattle Real Estate Investor blog for 2014. By far and away, our most popular blog of the year - indeed our most popular blog of all time was this post announcing the development of Artist Live/Work space at Rainier Beach Light Rail Station. It was read by almost eight times as many readers as our next most popular post:

http://wendywonder.blogspot.com/2014/02/seattle-artist-livework-development.html

The others in the Top Ten were as follows:

Green Development in Seattle

Seattle Rent Increases

Seller Financing under Dodd-Frank Act

Commercial Real Estate Term Sheet

Which Brokerage Should I Join?

King County Property Taxes

Door Knocking for Investors

Seattle Lot Restrictions

Happy Investing!

Seattle Rent Increases, and other stuff

On my way to a vacation in Kauai, with an unexpected overnight layover in San Francisco. Traveling always allows me to catch up on my reading, so here are a few things that tickled my fancy from Sunday's Seattle Times:

Apartment rents rose an average of 5.5% in the Seattle metro area in 2013, according to Dallas-based MPF Research. This makes it one of the best markets for landlords, the sixth largest rental increase in the nation. The average one-bedroom rent in King, Pierce and Snohomish Counties was $1051; $1255 for a two-bedroom.

In the Seattle metro area, Everett led the hikes with an average 8 percent rent increase, with South Seattle following with an average rent increase of 7.1%. This bodes very well for the artist live/work multifamily project that my company Van Gogh Development Corporation is proposing to do on South Henderson Street near the Rainier Beach Light Rail Station.

Meanwhile the economic recovery is clouded by the decline in labor force participation. While unemployment has allegedly dropped, the number of people looking for work has also decreased. The civilian labor force participation rate dropped to 62.8 percent of the available US work force in December, the lowest rate in 35 years. Even Washington's rate at  63.2 percent was below the 70% rates in 1998 - 1999.

Another article on the legacy of former Federal Reserve Chairman Ben Bernanke reported that during his tenure, the Fed's holdings swelled to above $3trillion through "quantitative easing" of roughly $85 billion per month in bond purchases. Basically, this is an increase in the money supply that has propped up the stock market at artificially - and unsustainably - high levels. There was both praise and condemnation for Bernanke's efforts.  Said Robert Reich, former Labor secretary and now professor at UC Berkeley," I salute Bernanke and the rest of the Fed in understanding their obligations to try to reduce unemployment as best they can....On the other hand, I think history will show the Fed's policy fueled widening inequality for the single reason that most average people didn't have access to low-interest loans."

And speaking of easy money, I have also been dismayed by the terms of the Dodd-Frank Act (which took effect January 10, 2014) on Seller Financing, that make it even more difficult for the average person to buy a house. More on that in the next blog. Until then,

Happy Investing!