House Bill 1728—Why It's Bad
For American Property Owners and What You Can Do About It

deals primarily with mortgage-related issues, and applies mostly to some banks and mortgage brokers. But here's the problem: if you sell more than 1 property within 36 months and 'carry the financing' in any way, you are defined by law as a mortgage originator!

    Check it out: it's all in section 101(3)(e), which says . . .

‘(E) does not include, with respect to a residential mortgage loan, a person, estate, or trust that provides mortgage financing for the sale of 1 property in any 36-month period, provided that such loan—
(i) is fully amortizing;
(ii) is with respect to a sale for which the seller determines in good faith and documents that the buyer has a reasonable ability to repay the loan;
(iii) has a fixed rate or an adjustable rate that is adjustable after 5 or more years, subject to reasonable annual and lifetime limitations on interest rate increases; and
(iv) meets any other criteria the Federal banking agencies may prescribe; and

                Yeah, I know, confusing. But here’s what it says: you are NOT subject to the law as long as you DON’T sell more than 1 property with owner financing every 3 years! Or, to put it another way, you ARE subject to the limitations of the law if you DO sell more than one property every 3 years via a land contract, owner-held mortgage or wrap-around mortgage—and who knows if they’ll define lease/options as owner financing, too?

                So what does it mean to be ‘subject to the law’? Well, at the very least, it means that you will have to comply with a long, confusing, and penalty-filled piece of national legislation, most of which isn't even included in this law, so we wouldn't know everything we would have to do until AFTER it's already passed and the various federal banking agencies have actually written the rules (did you notice item iv, above? that's what it says).

• Selling YOUR OWN HOME using a land contract or owner-held mortgage so that you can get a quicker sale, higher sale price, or better rate of interest than is available in other investments
• Carrying back owner-held second mortgages on investment properties that you sell
• Doing any kind of installment sale on residential properties including homes, condos, mobile homes, and even raw land that is zoned residential!

                Some people say, "No big deal, the law just reiterates some of the existing rules about selling properties. We'll just find ways to get around it."

                We say, "We should NOT have to find a way to 'get around' unconstitutional laws that shouldn't apply to us in the first place!"

                 1. Defining property owners as "mortgage originators" is trying to regulate the wrong thing. When we sell a property and carry payments for the  buyer, we're not making 'loans'—they don’t involve the transfer of money, or points or closing costs or adjustable rates or any of the other things that affected the mortgage crisis to begin with. They are INSTALLMENT SALES. We don’t give money to the ‘borrower’ and wait for it to be paid back: we give a property to the borrower and wait for it to be paid off. We are NOT lenders and we shouldn't let the federal government define us as such. If they're allowed to do this, we could end up having to follow every rule that mortgage brokers must simply to sell our own property--including getting mortgaIge broker's licences, with all of the costs and time involved. We should NOT have to do anything like this to sell our own properties!

                  2. This is bad for the real estate market, and, as we've seen, what's bad for the real estate market is bad for the economy. There are millions of Americans presently who are desperate to buy a home today, but are unable to due to very tough conventional loan market. There are millions of Americans who are desperate to SELL to their homes, some to avoid foreclosure, but who can't sell to a conventional buyer because of a lack of bank loans. The best answer for these folks is to make an agreement where the buyer gets to make payments directly to the seller. This law would make this kind of transaction--which is becoming more and more common, and is stimulating the real estate market right now--difficult or impossible for the average seller or investor to do within the bounds of the law.
                  Many of the millions of Americans who’ve been through foreclosure in the last 3 years can’t buy a house in any way OTHER THAN to negotiate some sort of owner financing with a seller—and HR 1728 would greatly reduce the number of properties available this way. Millions of potential home owners who would otherwise be able to re-start the process of paying off a home, and get the tax advantages of ownership, and help to revitalize communities across the country will be reduced to renting for several more years until they are able to qualify for stringent bank financing.

                  3. It is a completely unacceptable infringement on private property rights. Remember, the 'real' law wouldn't come until after the Senate's passage of this one. Read it carefully, and you'll see that it's really just an outline, with the details to be filled in later by bureaucrats, who, trust us, do not understand the creative selling business. If it's passed, you'll have no say in what happens next--you'll just be subject to the new rules that faceless agencies write for 'mortgage originators'--and if the new law passes, you'll automatically be defined as one! We believe that property owners who find a ready, willing, and able purchaser, should be able to control the sale of that property within the existing laws of their state (which already regulate the interest rate charged and some of the terms of the sale), without the interference of the federal government. The government does NOT have the right to tell us that we need special licensing to sell our own properties, nor do they have the right to even further regulate the terms under which we can sell or burden small investors with a new set of rules with which we can't comply.


                  This bill has already passed the House and is waiting for Senate approval. Please contact your senator via FAX and email to let him or her know that this law MUST NOT PASS, especially if it continues to include private citizens, selling their own homes, under the definition of 'mortgage originator'. You can get your senator’s contact information here:


                   The most important Senators to contact are the members of the Senate Banking Committee--the one handling this bill. It's especially crucial that you contact your Senator immediately if they are a member of this Committtee:


                   When you write, don’t emphasize the nature of your business, rather that both buyers and sellers would be greatly negatively impacted by this proposed new law as it stands.  Here are downloadable sample FAXes or emails (in Microsoft Word format) for your use--please use these merely as a guide--they need to be put onto your letterhead, into your own words and include your contact information:

• Download This Sample Letter if you have a real estate license
• Download This Sample Letter if you sell or will sell houses with owner financing
• Download This Sample Letter if you buy or will buy houses with owner financing

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