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August 2019 Dallas Bar Association Headnotes 15 _Fo_cu_·s _ Co_ns_t_ructionLaW/Re-al Propert0 Law ______PitfallsInvolving Owner Financing ofResidential Property inTexas

BYMARTIN CAMP lien. be subject to the licensing require, N on,conventional terms can ere, In installment sales contracts ( con, ments of S.A.F.E and T.S.A.F.E. Per, ate problems under Dodd/Frank when Owner financing can benefit both tracts for deed), the seller retains title sons involved in more than five trans, applying these factors . Balloon pay, parties. Sellers can realize a higher until the buyer has completed payment actions can engage an intermediary ments, for example, must be scruti, rate of return and buyers gain access of the sales price, sometimes after many (RMLO) to act as their agent to satisfy nized closely. The bottom line is that to financing not available conven, years. Rather than foreclosing on a lien, this requirement. There are many com, to comply, the lender must be able , tionally. Because of the home mart, traditionally the selle r was able to ter, parries now offering these services for a based upon verified documented infor, gage crisis and housing collapse, access minate the contract for buyer reasonable fee. mation, to determine that the bor, to conventional mortgage financing and terminate the buyer's right to pos, Regulations promulgated by the rower has the ability to repay (ATR) . has become more restricted and more session . Chapter 5 of the Texas Prop, Consumer Finance Protection Board Once again, use of a RMLO can assist highly regulated. Unaware sellers may erty Code imposes significant burdens ( CFPB) under Dodd/Frank require with this determination. find themselves subject to unintended upon sellers desiring to use installment creditors not to make covered Sellers intending to use owner liability for failure to correctly navi, sales contracts. Sellers have multiple unless the creditor has made a good financing on a regular basis should gate these more dangerous waters. disclosure obligations. After payment faith determination that the consumer carefully review the various regulatory Federal and state legislation by the buyer of a certain percentage of can pay in accordance with its terms. schemes to avoid inadvertent viola, designed to protect borrowers from the sales price, or making the requisite The list of factors that must be con, tions that can result in severe conse, predatory lending has l!lade the seller number of payments, the contract is sidered includes income, history, quences. HN financing more complicated and dif, essentially treated like a mortgage. It other , etc. There is a de minimus ficult. Three laws in particular affect must be foreclosed upon in the event exception for persons who are not in MortinComp isthe Assistant Dean for Graduate andInternational owner financing: (i) Chapter 5 of of a default. This preserves the buyer's the building business and engage in Programsand Professor ofPractice at SMU Dedman School of the Texas Property Code governing right to his equity. Failure to strictly three or less transactions in a year. Lawand con be reached at [email protected]. installment sales; (ii) the S.A.F.E. fed, comply with this section can result in eral act and the T.S.A.F.E. Texas ver, significant penalties for the seller. A sion, requiring sellers to have a mart, close review of this complicated Chap, gage loan origination license if they ter together with properly drafted con, are selling non, homestead property to tract forms and compliance regimens is other than family members; and (iii) mandatory to avoid costly violations. the Dodd, Frank Act which overlaps Leasing with an option to purchase, Momsin LawEvents Auaust the S.A.F.E. Act imposing obligations including partial credit for lease pay, Beinga working mom can be challenging. Being a working fawyer mom on seller/lenders to ascertain that the ments, is another seller financing canbe a differentballgame with its own unique challenges. Moms inlaw ' buyer/borrower has the ability to repay method. Sellers need to understand the loan prior to lending. that courts will look at the substance isgoing on its third year of being a no pressure, nocommitment, informal, Traditional seller financing, like over form. When treated as a financ, fun,support group for lawyer moms. The August events are: third party financing, involves a note ing, these might be subject to aggrega, and deed of trust. Sellers transfer title tion with other financings to meet the Friday,August 16: Noon, Meddlesome Mothin the Design District to the buyer secured by this lien. Sell, annual transactions figures requiring ers also have an implied vendor's lien mortgage broker licensing discussed Thursday,August 29: Noon, Nick & Sam's Grill - ParkCities/Preston Center which can become an express lien, if it below. Use of wraparound mortgages is included in the deed. Vendor's liens and land trusts are other financings must be judicially foreclosed. Prudent that could trigger compliance issues. [email protected] toRSVP orto join sellers will insist on both a deed and A seUer involved in more,than five theMoms inLaw email /istserv. trust and reserved express vendor's qualifying financings in a year may