The SAFE Act has received a lot of attention lately by park owners, but did you know that it's really only one law of many state and federal lending regulations you are required to comply with when selling homes on contract?
The SAFE Act requires you, the park owner, to either use a licensed Mortgage Loan Originator such as Blackhawk Capital Group or obtain your own origination licensing in order to sell your park homes on installment contracts. However, the greater issue is that obtaining those licenses for most companies is really a small step towards being fully compliant when acting as a creditor. Below are just a few of the other regulations that you need to follow as a creditor.
1) The Dodd - Frank Wall Street Reform and Consumer Protection Act (DFA) established the Consumer Financial Protection Bureau (CFPB) as an independent entity housed within the Federal Reserve Board (FRB). The newly created CFPB is the primary regulator for non-depository lenders with the broad authority to write rules to protect consumers, a.k.a. "borrowers", from unfair or deceptive financial products, acts or practices. The CFPB will be collecting, investigating and responding to borrower complaints which can be easily submitted from the comfort of a resident's home via the CFPB's website.
The CFPB will be in charge of the major consumer protection laws including RESPA, TILA, HOEPA, HMDA, SAFE, Fair Credit, Interstate Land Sales Full Disclosure Act; Telemarketing and Consumer Fraud and Abuse Prevention Act; Inspector General Act; Privacy Act; Alternative Mortgage Transaction Parity Act (AMTPA); Electronic Fund Transfer Act (EFTA); Equal Credit Opportunity Act (ECOA); Expedited Funds Availability Act; Fair Credit Billing Act; Fair Credit Reporting Act (FCRA); Fair Debt Collection Practices Act; Federal Deposit Insurance Act (FDIA); Federal Financial Institutions Examination Council Act; Federal Trade Commission Act; Gramm-Leach Bliley Act (GLB) and more.
This would naturally imply that if you're investigated because of a consumer's complaint stemming from a denial of credit or foreclosure, the CFPB could easily extend the investigation to include an examination of all your lending practices.
2) The Mortgage Disclosure Improvement Act (MDIA) requires creditors to wait 7 business days after the delivery of the initial Truth in Lending Disclosure Statement before you can close the loan. In addition, if the APR changes by more than a specified tolerance from initial disclosure you'll need to allow the borrower 3 additional business days. However, waiting periods can be shortened or waived if the extension of credit is necessary to meet a personal financial emergency. To shorten the waiver period, borrowers must prepare a signed and dated written statement, signed by all borrowers involved, detailing the specific emergency and requesting a waiver of the waiting period.
3) The Fair Credit Reporting Act (FCRA) places disclosure obligations on users of consumer reports and to ensure fair, timely, and accurate reporting of credit information. This means that you are required to notify the borrower when an adverse action is taken on the basis of such reports, such as if you deny someone a loan or offer them a smaller loan than what they applied for. In addition, you must identify the company that provided the report, so that the accuracy and completeness of the report may be verified or contested by the borrower. We recommend that you provide separate notices to each borrower to protect yourself from violating their privacy. There are additional criteria for those of you that furnish information to credit agencies that will land on a borrower's credit report.
4) The Truth in Lending Act (TILA) applies to each individual or business that offers or extends credit more than 5 times for transactions secured by a dwelling in the preceding calendar year. There are many applicable areas within TILA depending on how your loans are structured so we'll discuss the act in a few general areas only.
- TILA limits the amount of fees that can be charged on certain transactions without additional requirements and it limits when those fees can be charged for all transactions.
- TILA mandates early disclosure of a creditor's identity, amount financed, itemization of amount financed, APR, finance charges, total of payments, payment schedule, prepayment penalties and late payment fees.
- Creditors are liable for violation of the disclosure requirements, regardless of whether the borrower was harmed by the nondisclosure.
5) Equal Credit Opportunity Act (ECOA) prohibits discrimination of race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. Park owners may consider a borrower's immigration status in order to ensure the borrower will be in the country long enough to repay the loan. You may not ask borrowers if they receive child support or alimony payments unless you notify them that they need only to provide this information if it will be used in determining their ability to repay. We encourage park owners to create written loan guidelines with clear underwriting standards to avoid violating fair credit laws. If you make an exception to your loan guidelines, be sure to properly document the reason for the exception and add it to the borrower's file.
6) The Red Flags Rule requires creditors to implement a written Identity Theft Prevention Program to detect the warning signs of identity theft. There are four major components necessary to be compliant with the Red Flags Rule.
- First - be able to identify patterns, practices, and activity that signal identity theft.
- Second - incorporate business practices that will detect identity theft, "Red Flags". Park owners using our loan processing service can rest assured knowing all borrowers are run through a red flag checklist which is provided after the completion of our underwriting process.
- Third - detailed response for any red flags detected by red flags.
- Fourth - your program must be updated periodically to reflect any changes or additional information you've discovered that will help reduce identity theft.
As you may have heard, Blackhawk Capital Group has developed a comprehensive, customizable loan processing solution to meet the needs of manufactured housing community professionals selling homes on retail installment contracts. Our goal is to provide you with a full compliance solution so that you can continue doing what you do best without having to learn all of the lending laws. You continue to be the lender and after the loan closes, you also continue to service your own notes. We simply facilitate the part of the transaction that requires a licensed mortgage loan originator. We facilitate the delivery of every form and disclosure that you will need to ensure you are compliant with the lending laws in your state. Currently, we are providing loan processing services in 11 states including Oregon, Washington, California, Utah, Idaho, Nevada, Arizona, Florida, Colorado, Maryland and New Mexico.
Our standard fee per loan is $895; however, we are proud to offer MHCO member communities a discounted rate of $800. To take advantage of this discount please email firstname.lastname@example.org and be sure to include in your email that you're a member of MHCO.