All posts by Frances

Buying a Home, CFPB, Selling a Home

Darn that DODD-FRANK!

Cropped image of businesswoman writing on checklist

Just imagine, after years of struggling to complete college, your son, little Johnny has finally has his head on straight. He graduated, he’s worked for the family business for two years and is doing well. He met a nice girl and they have married.

He wants to buy a home. Unfortunately, Johnny has not always made the best decisions. His credit is not where it needs to be. Based on the fact that he is now making better decisions, you decide to loan Johnny the money to buy the home. The title company you’re working with will prepare a note and mortgage to secure your loan, what could be easier, right?

That Darn Dodd-Frank! Your loan is probably in violation of this Act. Based on this violation, your note and mortgage may not be enforceable.

Dodd-Frank is federal legislation that came about as a result of the real estate crisis of the last decade. The Act created the Consumer Financial Protection Bureau (“CFPB”) and other laws that regulate all consumer loan transactions.

One of the other laws is the Loan Originator Rule. In general terms, if the borrower will use the home for residential purposes (whether a primary residence, a second home or a vacation home) then the person arranging the loan is defined as a “loan originator.” A loan originator must have a mortgage originator’s or broker’s license. Pursuant to the Act, any person who offers and negotiates terms of a residential mortgage is deed to be a mortgage loan originator. Unfortunately, for mom and dad above, there are no exceptions for a person, who is not a Seller, to secure a mortgage with a residential property.

The Act does provide for certain exceptions. Namely, Seller financing, these exceptions are as follows:

One property exception: A Seller may extend credit, secured by a mortgage encumbering residential property and is not considered a loan originator if:

(a) they are a natural person, estate or trust;

(b) they provide financing for only one property in a 12 month period;

(c) they own the property securing the mortgage;

(d) they did not construct or act as the contractor for the construction of a residence on the property;

(e) repayment of the loan must not result in negative amortization;

(f) balloon payments are allowed, however the term of the balloon is not clear. Most practitioners believe that no shorter time period than 5 years should be used.

(g) while the Act does not prohibit adjustable rates, a fixed rate is suggested. The Act has restrictions, limitations and caps on rate charges.

(h) the seller is not required to investigate the buyer’s ability to repay the loan.

Three Property Exception: A Seller may extend credit, secured by a mortgage encumbering up to three residential properties and is not considered a loan originator if:

(a) they are a natural person, estate, trust or an entity;

(b) they provide financing for three properties or less in any twelve month period;

(c) they own the property securing the mortgage;

(d) they did not construct or act as the contractor for the construction of a residence on the property;

(e) the loan must be fully amortizing and there are no balloon payments or structures allowed;

(f) while the Act does not prohibit adjustable rates, a fixed rate is suggested. In this context, limits and caps are required’

(g) the Seller is required to make a reasonable investigation regarding the Buyer’s ability to repay the loan. Although formal documentation is not required, the investigation should be done in good faith and the results should be maintained.

While other exceptions exist, they are very complicated and are not practical for ordinary Seller financers.

Good news is Dodd-Frank does not apply to every loan. First, it only applies to residential loans. So, if you’re dealing with vacant land, commercial properties, rental properties or properties used solely for investment purposes, Dodd-Frank simply does not apply. Moreover, Dodd-Frank does not apply to non-residential buyers. So, if the buyer is a corporation, limited liability company or partnership etc., Dodd-Frank will not apply and the loan can be made without consideration to its restrictions.

So, now that we know that mom and dad have a problem trying to help little Johnny buy his home, what are we to do?

One solution would be for the mom and dad (the lender) to purchase the property from the underlying Seller first. Then mom and dad as the Seller could sell little Johnny the home and take back the note and mortgage under the one property exception. Yes, the transaction costs would increase, but the creative closers at the Florida Agency Network will work with you to keep these costs down.

Another solution would be for mom and dad to work through a mortgage broker. The mortgage broker will be required to comply with all of the various lending laws and regulations. While the broker will likely charge a fee for this service, it is another option that will allow the transaction to go forward.

Network News

The Title Report Features FAN CEO, Aaron M. Davis, in NS3 Preview

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This week’s Title Report update included a special preview and details on the 2016 National Settlement Services Summit, specifically the Breakout Room Session “Business NOT as Usual” which features Florida Agency Network CEO, Aaron M. Davis and Orange Leaf Consulting CEO, Cynthia McGovern.

To read the full feature, click HERE.

To register for this year’s National Settlement Services Summit, click HERE.

Network News

FAN CEO, Aaron M. Davis, to Speak at 2016 NS3 Summit

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The National Settlement Services Summit offers a destination for industry leaders to come together for “unrivaled networking and learning.” This year’s theme is Knowledge In Action and will offer educational breakout sessions with keynote speakers who are highly regarded within the Settlement Services Industry. One of which will be our very own Aaron M. Davis, CEO/President of Florida Agency Network.

Davis will be speaking in the Breakout Session “Business NOT As Usual” on Tuesday, June 7 from 9:40 am – 10:40 am. Davis, along side Cynthia McGovern, Founder of Orange Leaf Consulting, will discuss life in a post-TRID world and how to embrace the changes to elevate business results.

To register for NS3, visit www.tinyurl.com/NS3Registration. You can save $30 when you use the Coupon Code: SPEAKER.

NS3 Registration - SM FAN (1)

Compliance, Real Estate Headline News

FDFS Implements New Ruling on Unlawful Inducements

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The Florida Department of Financial Services has adopted a new rule (Rule: 69B-186.010) regarding “unfair methods of competition and unfair or deceptive acts or practices in the transaction of title insurance.” The rule goes into effect on February 9, 2016 and will ensure the playing field within the title industry continues to have balance.

The ruling details practices and activities that are deemed unfair and unlawful. Some of the activities listed include:

  • Providing membership in any organization, society, association, guild, union, alliance or club at a discount, reduced rate, or at no cost to a referrer of settlement service business.
  • Sponsoring and hosting, or paying for the sponsoring and hosting, of open houses for real estate brokers or real estate sales associates to promote their listings.
  • Paying advertising costs to advertise and promote the listings of real estate brokers or real estate sales associates via publications, signs, emails, websites, web pages, banners, or other forms of media.

While some of the mentioned activities are vague, the FDFS makes the seriousness of each offense known.

To read the full list of illegal activities and the ruling, click HERE.

Network News

Rotary Club Efforts Help Save a Life

Photo by DAVE NICHOLSON
Former Rotary Club President Aaron Davis takes a turn at the microphone as the club turns over the last of the 50 automated external defibrillators that the Rotary donated to the police department. Police Chief Ed Duncan, left, Capt. Dave Millich and Rotary Club President Brian Griffin look on. for DAVE NICHOLSON

 

A few years ago, Aaron M. Davis, Florida Agency Network CEO and former Plant City Rotary Club President, had a goal of equipping each patrol car in the Plant City Police Department with Automated External Defibrillators (AED) in an effort to assist in medical emergencies. This goal was completed last year, and the effort is paying off.

Last week, the PC Rotary Club was informed that one of the AEDs installed in a patrol car aided in saving the life of a 46 year-old man who had gone into cardiac arrest. According to Captain Rodriguez of Plant City Fire Rescue, the PCPD Officers were able to provide “exceptional care to the patient utilizing their AED and hands on cardiopulmonary resuscitation.” The PCPD Officers on the scene provided the patient with shocks in order to stabilize him until the Plant City Fire Rescue were able to get to the scene.

Since delivering the first units in 2013, the Rotary has donated a total of 47 units, which have been used at least 5 times now.

“I am so thankful to everyone who helped the Rotary achieve this goal. I hope the AED units continue to assist more PCPD Officers in saving the lives of those in this great community,” said Davis.

Paramount Title, Press Releases

Paramount Title, a Florida Agency Network Company, Opens New Office in Central Florida

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Ocala, Fla. – Jan. 4, 2016 – Paramount Title, one of Florida’s leading independent title agencies and member of the Florida Agency Network, is expanding its statewide reach by opening a new office in Ocala. Office manager Sandie Rizzo will lead the office, located at 8444 SW 103rd Street Road. Joining Sandie will be Teri Armstrong, Linda Webb and Dawn Creager.

With current offices on Florida’s West Coast, the new office gives Paramount Title an opportunity to bring its expert service to clients in Marion County and surrounding areas.

“We are excited to be part of the expanding Paramount Title team throughout the state. Paramount Title’s resources and reputation sets the standard in the industry, and this team is ready to help clients take their business to the next level,” says Rizzo.

In 2015, Paramount Title saw tremendous growth and change within the company, as well as the title industry. As a member of the Florida Agency Network, Florida’s largest network of independent title agencies, Paramount Title has access to resources including, private title plant and ancillary services, compliance management, SSAE 16 SOC 1 & SOC 2 certifications and powerful partnerships throughout the state.

“The growth of Paramount Title within Florida has been exciting. With this additional location, we’re able to better serve our clients by providing a strategically located office in Marion County to both serve existing clients, and provide coverage for several of our growing builder accounts,” says Aaron M. Davis, CEO of the Florida Agency Network and its multiple brands, which include Paramount Title, Hillsborough Title, Trident Title, Tampa Bay Title, Cornerstone Title, Homeplus Title, Performance Title & Escrow, StrongHold Title, Progressive Title Solutions, Hometown Title Network, BPM Solutions and Premier Data Services.

Network News

The Title Report, and More, Feature Florida Agency Network’s Compliance Officer

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Last week’s announcement of the Florida Agency Network’s new Compliance Officer for the State of Florida, Andrea Somers, is getting recognition. Yesterday, the Title Report featured the announcement in its news section. Click here to read the feature.

Andrea has also been recognized in the Tampa Bay Business Journal’s People on the Move section! Click here to see it.

As the Florida Agency Network continues to grow and strive to be Florida’s authority in title insurance, we are confident that more great announcements are on the horizon for 2016.

Press Releases

Florida Agency Network Appoints Compliance Officer

Tampa, Fla. – November 23, 2015 – The Florida Agency Network (FAN), Florida’s largest network of independent title agencies, is proud to introduce Andrea Somers as its Compliance Officer, helping to guide the Florida Agency Network and its embodying agencies smoothly through the current era of heightened compliance expectations and requirements.

“With all of the growth and expansion, as well as changes to our industry, it only makes sense to have a dedicated compliance officer on hand. Andrea is well versed in the underlying regulations within our industry. She will be a great asset to our team.” says Aaron M. Davis, CEO of the Florida Agency Network and its multiple brands. FAN includes Hillsborough Title, Trident Title, Paramount Title, Tampa Bay Title, Cornerstone Title, Homeplus Title, Uptown Title, Bella Title, Performance Title & Escrow, Stronghold Title and Progressive Title Solutions.

As a licensed title agent in the State of Florida for over 14 years, with established proficiency in creating, and training in, corporate policies and procedures, Andrea brings the knowledge, experience, and expertise necessary to ensure all compliance regulations are met within the Network. Entering the title world in 2001, she worked her way through the ranks to become National Vendor Manager at TransContinental Title Company. In that role, she managed third-party vendors nationwide, including all notary signing agents and title abstractors. In 2010, Andrea began managing several different departments within New House Title, LLC, including Contracts, Processing, Closing, Funding, and Post Closing.

“I am so thrilled and honored to be working with such a talented group of people at the Florida Agency Network,” Andrea remarked, “It’s amazing to see the dedication everyone has towards being the industry leader in the State of Florida. I’m proud to be a part of the FAN Family!”

As the Florida Agency Network’s Compliance Officer, she will monitor the application of compliance requirements throughout the FAN Network agencies, ensuring all employees and vendors adhere to established procedures in order to safeguard the Non-Public Private Information (NPPI) of all clients and partners.