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Seller Financing Undergoes Nationwide Change

Private property owners have been swept into the regulations of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act which was signed into law in July 2010. The seller financing regulations go into effect this month.

There are two exceptions Nevada homeowners should note:

1. Natural Person and not more than 1 residential loan per year meeting all the requirements below.

2. Person or Entity and no more than three residential loans in any 12-month period (not necessarily from January to December) meeting all the requirements below.

Natural Person - 1 Property

1. You provide seller financing for only one property in any 12-month period.

2. You owned the property securing the financing.

3. You did not construct, or act as a contractor for the construction of, a residence on the property in your ordinary course of business.

4. Your financing does not result in negative amortization.

3. Your financing has a fixed rate or does not adjust for the first five years.

Person or Corporation - 3 Property

1. You provide seller financing for three or fewer residential properties in any 12-month period.

2. You owned the properties securing the financing.

3. You did not construct, or act as contractor for the construction of the property.

4. You financing is fully amortized.

5. Your financing has a fixed rate or does not adjust for the first five years; and

6. The seller has determined that the borrower has the reasonable ability to repay the loan according to its terms per 12 CFR 1026.43(c). The CFPB states you may use the criteria set forth in 1026.43(c) or comment 36(a)(4)-1 to comply with the ability-to-repay standard. (This could include considering earnings as evidenced by payroll or earning statements, W-2s, etc.; other income from a federal, state or local agency providing benefits and entitlements; and/or income earned from assets (such as financial assets or rental property. The value of the dwelling may not be considered as evidence of the buyer's ability to repay (See in general, The Daily Journal of the United States Government Loan Originator Compensation Requirements Under the Truth in Lending Act (Regulation Z))