Forbes Magazine published an article titled “How Do Homeowners Accumulate Wealth? ‘ October 14, 2015. The article was written by the chief economist for the National Association of Realtors, Lawrence Yun. He quoted the Federal Reserve…”The differences between buying and renting are massive. According to the Federal Reserve, a typical homeowner’s net worth was $195,400, while that of renter’s was $5,400. The data reflects 2013 and the next survey of household finances, which is conducted every three years..”…Based on what has happened since 2013 and projecting a conservative assumption of what could happen next year to home prices if we see only 3% price growth, the wealth gap between homeowners and renters will widen even further. The Fed is likely to show a figure of $225,000 to $230,000 in median net worth for homeowners in 2016 and around $5,000 for renters. That is, a typical homeowner will be ahead of a typical renter by a multiple of 45 on a lifetime financial achievement scale.”
To that Point, the Dodd-Frank Act is stunting this process. That is why the Seller Finance Enhancement Act — currently H.R. 1360 should be passed. This bill would make some minor focused and targeted changes to the rules governing the housing market to allow for more flexibility and greater consumer choice.
H.R. 1360 amends both the Safe Act and Dodd-Frank to allow up to twenty-four seller-financed transactions per year without the need for the seller to be licensed as a mortgage originator. It requires the Treasury Department to study the low-value home market over the next three years and report back to Congress with suggestions to improve the sales and financing of these homes.
What this bill does not do is remove any of the safeguards related to these transactions. Specifically, seller financers must still comply with the “ability-to-pay” portions of Dodd-Frank as well as the interest rate rules and the ban on balloon payments. Seller financers are currently limited to doing only three deals in a twelve-month period of time without obtaining licensing as a mortgage originator. This came as a result of the Safe Act taking us down to five and Dodd-Frank taking us down to three.
The key arguments in support of raising the number of seller financed deals to twenty-four per twelve-month period is that this number is a compromise reached after extensive negotiations in meetings between the National Association of Realtors and various mortgage and banking interests. Raising the number to twenty-four satisfies the needs of 85-90% of all those who do seller financing and allows the National Association of Realtors to remain neutral on the bill.
Some of the key proponents of H.R. 1360 are the original sponsor Roger Williams and original co-sponsor Henry Cuellar.
The Seller Finance Coalition is a lobbing group Capstone Capital USA supports and is a member of. It’s is to overcome the lack of knowledge as to how this problem is preventing people who, for various reasons, are not qualified by the banks to obtain capital needed to buy homes, or are looking to purchase a home in a market for which banks are either unwilling or unable to lend money.
A recent survey of consumers commissioned by the National Association of Realtors revealed that 80% believe that purchasing a home is a good financial decision (2015 National Housing Pulse Survey). Most consumers appear to already understand the simple math and the benefits of homeownership. Real Estate Market Place leaders all agree that home ownership steadily builds wealth. Seller financing is a way for more people to be able to accomplish this dream.
The Seller Finance Coalition http://www.sellerfinancecoalition.org/ is having a “FLY-IN” to lobby at Capital Hill July 18 – 19. Updates of that lobbying effort will be posted on this site. I will be a participant of that effort.