Many times a buyer doesn’t have the necessary capital, credit, or financing options to purchase a home. Seller or Owner Financing provides a solution for buyers who ordinarily wouldn’t be able to obtain conventional financing. However, in some situations seller financing makes the seller a lender. When this happens, it is not prohibited under the Dodd-Frank Act.

What is a mortgage originator?

A mortgage originator, according to the Dodd-Frank Act, is “any person who for direct or indirect compensation or gain or in the expectation of direct or indirect compensation or gain takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan.”

According to the act, any person who negotiates terms of a residential mortgage loan is considered to be a “mortgage originator.” This means that the person MUST be a licensed mortgage broker and comply with all the applicable laws. However, the act also provides for several exceptions where certain sellers can provide owner financing without being a licensed broker.

When can a Seller provide financing under the Dodd-frank act?

The mortgage originator law applies to those homeowners who are purchasing residential properties for residences. A residential property includes up to four units and applies to homes, condominiums, mobile homes,…