Phil Querin Q&A: Question: Selling a Home After Abandonement - Do I need a Mortgage Broker?

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March 1, 2016
Phil Querin
MHCO Legal Counsel

Question: I understand that today I may sell a home our park acquired back in an abandonment without having to hire a mortgage broker. Can you explain the new law?

Answer:  I assume you are referring to a sale where you carry back the security obligation (as opposed to the buyer paying cash or securing third party financing).[1] In this respect, you are correct, subject to several limitations. MHCO worked extensively with the Oregon Department of Finance and Corporate Securities (“DFCS”) and others to develop an exemption to the Oregon law that would permit park owners to engage in the sale of formerly abandoned homes to purchasers for the purpose of a primary residence without having to use a broker (referred to as a “Mortgage Loan Originator” or “MLO” under the new law).  Here is a summary of the new exemption law which will be found in ORS 86A.203

 

  • Here are the rules for those licensed as a manufactured structure dealer under ORS 446.691.
    • They may offer or negotiate the terms of the loan three or fewer times in a 12 month period;
    • They must use a written sale agreement that complies with certain requirements, or with DFCS rules[2].
    • The dealer may not hold more than eight residential mortgage loans without securing a MLO license under ORS 86A.203(1). [Presumably, this means “at one time.”]

 

  • Here are the rules for those licensed as a limited manufactured structure dealer under ORS 446.706.
    • They may offer or negotiate terms of the loan five or fewer times in a 12 month period:
    • They must have an ownership interest in a manufactured dwelling park;
    • They must use a written sale agreement that complies with certain requirements, or with DFCS rules.
    • They may not hold more than twelve residential mortgage loans without securing a MLO license under ORS 86A.203(1)[Presumably, this means “at one time.”]

Conclusion I marvel at the complexity of these laws which have been implemented to “protect” consumers from creditors – especially small creditors, such as park owners selling formerly abandoned homes to fill a space and provide affordable housing.  If these small transactions caused the credit and housing crisis of 2008 and the ensuing Great Recession, perhaps I could understand.  But they didn’t. What we’re are seeing is a huge net of bureaucratic regulation that has been cast over even the smallest of transactions under the guise of consumer protection.

Going forward, my suggestion is for park owners to decide if: (a) They want to handle these transactions without the use of a MLO (which will add several hundred dollars to each sale) or (b) Go it alone. If the latter, my suggestion is to create the simplest of paper transactions, with a fair market rate of interest, no adjustable rates, no negative amortizations. Balloon payments are permissible.  However, there is a limit on this safe-harbor. If you made more than four such carry-back loan transactions in the prior calendar year, an entirely different and more complex set of rules apply, and you should consider using either a MLO or an attorney qualified in such matters.

 


[1] The Federal SAFE Act and its state counterparts, have interpreted (incorrectly in my opinion) “loans”  to include not just funding coming from a third party lender, but also seller-carryback transactions where the seller “carries the paper” and collects the periodic payments.

[2] The statute cited to for compliance, ORS 646A.052, et. seq. is antiquated and inadequate for residential housing today.  Presumably, the DFCS will have to create a suitable form through rulemaking.

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