Travis Duncan

The U.S. Senate is considering a bill that would severely limit the way you do business as a creative real estate investor and, more importantly, is an inexcusable infringement of the property rights of all Americans.

HR 1728, which you can view in its entirety here, deals with a plethora of mortgage-related issues, mostly around limited terms and fees on residential loans.

But the heinous piece of the legislation is in section 101(3)(e), which defines the affected principals as:

(E) does not include, with respect to a residential mortgage loan, a person, estate, or trust that provides mortgage financing for the sale of 1 property in any 36-month period, provided that such loan -

(i) is fully amortizing;
(ii) is with respect to a sale for which the seller determines in good faith and documents that the buyer has a reasonable ability to repay the loan;
(iii) has a fixed rate or an adjustable rate that is adjustable after 5 or more years, subject to reasonable annual and lifetime limitations on interest rate increases; and
(iv) meets any other criteria the Federal banking agencies may prescribe;

Yeah, I know, confusing.

But here's what it says:

You are NOT subject to the law as long as you DON'T sell more than 1 property with owner financing every 3 years!

Or, to put it another way, you ARE subject to the limitations of the law if you DO sell more than one property every 3 years via a land contract, owner-held mortgage or wrap-around mortgage... and who knows if they'll define lease/options as owner financing, too?

So what does it mean to be "subject to the law"?

Well, at the very least, it means that you will have to comply with a long, confusing, and penalty-filled piece of national legislation.

Here are the types of transactions that you would be restricted from doing more than once every 36 months:

• Selling YOUR OWN HOME using a land contract or owner-held mortgage so that you can get a quicker sale, higher sale price, or better rate of interest than is available in other investments
• Carrying back owner-held second mortgages on investment properties that you sell
• Doing any kind of installment sale on residential properties including homes, condos, mobile homes, and even raw land that is zoned residential

Yes, there will undoubtedly by ways to "get around it" - some have suggested that getting a mortgage broker's license and then learning and following the vast new set of regulations would circumvent the "problem".

But the bottom line is, this law has to be stopped and it has to be stopped NOW.

Here's why:

1. Congress is trying to regulate the wrong thing.The deals we make are not "loans" - they don't involve the transfer of money, or points or closing costs or adjustable rates or any of the other things that caused the mortgage crisis to begin with. They are INSTALLMENT SALES.

   We don't give money to the "borrower" and wait for it to be paid back: we give a property to the borrower and wait for it to be paid off. Regulating this will have no effect on the foreclosure crisis.

2. It is a completely unacceptable infringement on private property rights.When I own a piece of property and I find a ready, willing, and able purchaser, I should be able to control the sale of that property within the existing laws of my state, which already regulate the interest rate that I am able to charge and some of the terms of the sale.

   The government does not have the right to tell us that we need special licensing to sell our own properties; nor do they have the right to further regulate the terms under which we can sell or burden small investors with a new set of rules that we can't comply with.

   Not only will this new law, if passed as written, effectively choke off owner financing as an exit strategy for you, it will also take away housing choice for your buyers. The millions of Americans who've been through foreclosure in the last 3 years can't buy a house in any way OTHER THAN to negotiate owner financing with a seller - and HR 1728 would greatly reduce the number of properties available in this way.

   Millions of potential home owners who would otherwise be able to re-start the process of paying off a home, and get the tax advantages of ownership, will be reduced to renting until they are able to qualify for bank financing.

Here's What to Do Right Now:

This bill has already passed the house and is waiting for Senate approval. Please contact your senator via email and snail mail to let him know that this law MUST NOT PASS in its current form. You can get your senator's contact information here:

http://www.senate.gov/general/contact_information/senators_cfm.cfm

As always in cases like this, you have an automatic handicap to overcome... the fact that you are a real estate investor and are therefore viewed as part of the problem. So when you write, don't emphasize the nature of your business, just that you and your buyers would be greatly aversely affected by the new law.

We need THOUSANDS of these communications to go out in the next few days to have a CHANCE of stopping this in its tracks. So whether you're a new or experienced investor, PLEASE take the time right now to write your elected representative!

Here's a quick link to an article in Forbes about how Charlotte is ranked as one of the top 5 housing markets in the US! If you scroll to the bottom of the page you'll be able to see the lists. The rest of the article paints a pretty bleak picture of the housing market as a whole.

For the agents out there - Have you tried, or had experience hiring a short sale negotiator to help to deal with the banks? From my perspective(as an investor), this has worked well because I am using someone who has actually worked in the loss mitigation department of a major lender, & now does negotiations on a full time basis.

It seems from reading through a heap of blogs about short sales, the negotations( & sellers walking) is the most daunting task that faces realtors. Your feedback is welcome & appreciated...

I was wondering if ya'll have seen a surge in buyers related to the historically low interest rates?

Freddie Mac announced today that mortgage rates fell to 4.96% this week - the lowest level since it began surveying lenders in 1971. Rates have been falling now for 11 straight weeks when the Treasury announced that the government would buy up to $500 billion of mortgage-backed securities backed by Fannie Mae and Freddie Mac.

The lower interest rates have triggered a flurry of refinancing activity as homeowners with good credit and equity in their homes rush to lock in. Home purchase mortgages have also increased.

Rates were 5.21% in June of 2003. Did you ever think they would go below that? We're near 50-year-low interest rates. How much lower do you think they can get?

If I were you, I would be locking in these once in a lifetime rates on all your rental properties. If you don't have any rental properties you should seriously look into buying some great foreclosures now, while prices are so low. With all those homeowners losing their homes, they are turning to the rental market and you have a ready stream of clients to keep your rentals full.

We are in the process of negotiating short sales & purchasing them in the Charlotte, NC area. If a realtor brings us a potential deal we will then use that realtor as our buyer's agent to sweeten the deal for them. Buying these properties to resell or hold as rentals is turning out to be a great business to be in...

Hey ya'll, I was wondering what your guys thoughts were on this article I just came across...

Report: Housing Markets Will Roar Back in 2009
Wednesday, January 07, 2009 -

FAIR OAKS, CA - The nation's foreclosure hemorrhage has finally slowed and 2009 should see a significant decline in foreclosures as buyers return, pushing home prices up and fueling a real estate recovery, according to the 2009 Outlook from ForeclosureS.com.

"Recovery is underway. Affordable is back in the housing market," says Alexis McGee, real estate expert, educator, and president of ForeclosureS.com. "In 2009, housing will not only recover, but we'll see buyers leap into this market in droves, depleting our housing oversupply, and actually put higher price pressures on the market."

"With 4.5% fixed mortgage rates, housing prices lower than they were 'pre-housing bubble', commodity prices lower, tax credits available for homebuyers, and the government eager to stimulate our economy, for the first time in years I can see prices rising again in 2009" adds McGee. "This is a great time to buy properties for investors -- to buy properties at wholesale prices below today's already low prices -- rent them out for positive cash flow and then sell them for big profits in late 2009 once price appreciation kicks in."

The latest U.S. Foreclosure Index by ForeclosureS.com shows a slight drop from 84,534 to 84,291 in the number of properties repossessed by lenders following foreclosure last month over October. These are REOs or lender-owned real estate. But that's off nearly 21% from September's 106,415 REO filings. (Year to date 12.6 of every 1,000 households nationwide have been lost to foreclosure.)

"Certainly some of the drop reflects growing results of government and private efforts to keep homeowners in their homes," says McGee. "But the recovery takes shape when you factor in other things like what the National Association of Realtors calls ‘solid' gains from a year ago in existing home sales in some key areas, and the fact that many of the same areas are seeing dropping home prices. Fewer foreclosure actions were initiated in the last quarter, too, according to the latest Mortgage Delinquency Survey from the Mortgage Bankers Association," McGee adds.

"California is a great example of what's happening now and what lies ahead for the housing sector. Long a leader in the subprime mortgage mess and rising numbers of foreclosures, the state's foreclosures have slowed significantly," says McGee.

The latest U.S. Foreclosure Index numbers show November REO filings in the state down to 15,978 in November, down 6.55% from October and off nearly 50% from September. Home prices there have come down, too, as much as 39.4% from the third quarter from a year ago in some areas like Riverside-San Bernardino-Ontario, according to National Association of Realtors numbers. That's left many homeowners that bought their homes at high price points with upside down mortgages-they owe more than the value of the home. But it's also made homes more affordable for plenty of other people. Solid and in many cases rising existing homes sales support that, adds McGee.

In November, another perennial leader in foreclosures, Arizona, saw its REOs and pre-foreclosure filings drop (down 5.19% and 5% respectively), according to U.S. Foreclosure Index numbers.

The pre-foreclosure picture when averaged nationally isn't quite as bright. Pre-foreclosures include notice of mortgage default and/or foreclosure auction. Amid all the negative economic news across the nation, pre-foreclosures for November were up 5.57% from October with 27.1 of every 1,000 households across the country facing some kind of foreclosure action (177,254 vs. 167,906 filings in October). But that's still down nearly 2% and more than 7.5% from March's high, according to U.S. Foreclosure Index analysis.

"Pre-foreclosure numbers likely climb in early 2009 (albeit at a much slower rate than in 2008)" says McGee. "Too many homeowners already are just too overextended and likely won't seek help to work out their delinquent mortgages until after a pre-foreclosure filing against their property. That filing, it seems, is the wake-up call for many to get the help they need and sell" McGee adds.

"Potential homebuyers and investors on the other hand, will find the bargains growing in 2009," says McGee. "As the year progresses more bright spots will emerge, too, both in terms of foreclosure numbers and housing markets as efforts to work with strapped homeowners really begin to take root."

"I wish my crystal ball could pinpoint everything that's going to happen with housing markets in the next 12 months, but there are just too many variables. What I can tell, though, is that hardest hit housing markets have already hit bottom and others will follow in 2009. Third-quarter National Association of Realtor numbers actually show existing home sales picking up in about 20 percent of the areas studied. And, given the uncertainty and volatility of the stock market combined with all time low interest rates, extremely affordable low priced homes, and all the choices out there, 2009 is an excellent time to buy real estate. Properties, especially foreclosed ones, will be highly discounted, lenders are motivated to work with buyers, and the opportunities are abound. The bottom line to keep in mind: What goes down absolutely positively will go back up again.

"The return of solid housing markets is an important part of restoring stability to financial markets. The market will return when mortgage rates and home prices are down, and that's exactly what is happening now in the hardest-hit areas of the country," adds McGee.

Source - Originator Times