The Dodd Frank Act has stirred up more than a little confusion and controversy in the real estate industry. There are still investors out there saying, “That doesn't apply to me or who's going to enforce this”?
Even if you can meet all of the new requirements one of the things I learned at my REIA meeting last week was that you have to fully amortize any loans that you do.
In the past, it was pretty common for investors providing seller financing to have lower payments with a shorter term and have a balloon payment at the end of the specified term.
You can no longer do that.
Now you are required to qualify the borrower, and it is your responsibility to determine that they can afford the payment. That's right; it is on your shoulders.
To put this in perspective; if that borrower can only afford a $500 a month payment and the fully amortized loan will take 30 years to repay, your money will be tied up for 30 years. I'm pretty sure that is not what most investors are interested in doing.
The Basics of the Dodd Frank Act
I did an interview a while back with my friend and colleague Bill Walston about the Dodd Frank Act. For those of you who don't know Bill he is a CPA, tax strategist and master lease option expert. He is also extremely knowledgeable on Dodd Frank Act.
In our interview we talked about the basic requirements of the Dodd Frank Act, and exactly how real estate investors can meet these requirements.
Here are just some of the things we discussed: Read the rest of this entry →