Financial Reform Act of 2010 Eliminates Valuable Option For Many Home Buyers and Sellers.

Jan. 11, 2011 - PRLog -- Although there remains virtually no question that we had a financial system that was out of control and lacked proper oversight and regulation, the haste to implement a fix stripped citizens of valuable private property rights. As a result of the Financial Reform Law of 2010, private property owners can no longer offer owner financing to prospective buyers’ unless they register as a mortgage broker.  

The National Association of REALTORS and its state and local affiliates (which claim to be the Voice of Real Estate) stood idly by while property owners were stripped of this valuable private property right that existed since 1776.

Some people say the loss of a few private property rights is a small price to pay for all the good financial reform did or will do.

Others, especially those most affected by this intrusion, disagree.  

Embedded deep within the bill was a provision to require that virtually everyone in a mortgage loan process be trained, tested and insured against harm to consumers. Most people view this as a good measure and feel that it should have been that way all along. Some even were surprised to learn that it was nonexistent prior to now.

The consequence of this (perhaps unintended) was to make it a violation of the law for a person who owns real estate to offer financing directly to a purchaser. In spite of the fact that in some markets this may be the only way to sell and purchase property, lawmakers blindly accepted this limitation.

In southern states and other places where agriculture is a large part of the economy, it was common to owner finance land and houses. Under the new law, a property owner would have to become a licensed mortgage broker to offer such an arrangement.

Although it’s impossible to know how often this option was used to create home or land ownership in the past, it’s fair to say that small investors, farmers and others in this segment share no blame for the financial woes of the US mortgage business.

The damage is done and now small investors and farmers are faced with more of an economic challenge. It may be years before the effect of this reckless and unfair provision is actually measurable.  In the meantime, thousands of potential home/land owners will be shut out and the economic hardship will intensify for families and individuals who relied on owner financing as an option to purchase a home.

Reference: Dodd-Frank Wall Street Reform and Consumer Protection Act 2010.

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