Affordable Homeownership Access Act

I 116TH CONGRESS 2D SESSION H. R. 5614 To exempt small seller financers from certain licensing requirements. IN THE HOUSE OF REPRESENTATIVES JANUARY 15, 2020 Mr. GONZALEZ of Texas (for himself, Mr. CUELLAR, Mr. GOODEN, and Mr. BARR) introduced the following bill; which was referred to the Committee on Financial Services A BILL To exempt small seller financers from certain licensing requirements. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Affordable Homeown- 4 ership Access Act’’ 5 SEC. 2. FINDINGS. 6 Congress finds the following: 7 (1) Real-estate seller financing is a transaction 8 in which the owner of a real estate property provides 9 financing for the buyer of that property and the 10 VerDate Sep 11 2014 17:57 Jan 16, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H5614.IH H5614 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 5614 IH buyer makes some form of a down payment to the 1 seller and then makes installment payments to the 2 seller over a defined period of time. 3 (2) Seller financers provide financing in lieu of 4 the buyer choosing to obtain a loan from a bank. 5 (3) The seller finance industry consists of small 6 business owners who own real estate and provide fi- 7 nancing on those properties to underserved bor- 8 rowers who cannot or would prefer not to obtain tra- 9 ditional financing. 10 (4) It is recognized that seller financers are 11 governed by each State’s particular real estate and 12 consumer protection laws (including ability to repay, 13 deceptive trade practices, and usury laws), as well as 14 State and Federal fair housing and equal oppor- 15 tunity laws. 16 (5) Neither of those laws described under para- 17 graph (4), nor the amendments made by this Act, 18 are applicable to transactions known as contracts for 19 deed, land installment contracts, lease options, op- 20 tions to buy, or rent-to-own agreements. 21 VerDate Sep 11 2014 17:57 Jan 16, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H5614.IH H5614 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 5614 IH SEC. 3. EXCEPTION FOR SELLER FINANCERS WITH RE- 1 SPECT TO LOAN ORIGINATOR LICENSE OR 2 REGISTRATION REQUIREMENTS. 3 Section 1504 of the S.A.F.E. Mortgage Licensing Act 4 of 2008 (12 U.S.C. 5103) is amended by adding at the 5 end the following: 6 ‘‘(c) EXCEPTION FOR SELLER FINANCERS.—The re- 7 quirements of this title shall not apply to the following: 8 ‘‘(1) REAL PROPERTY SELLER FINANCERS.— 9 Any person (other than a depository institution) 10 who, during any 12-month period— 11 ‘‘(A) originates no residential mortgage 12 loan or extension of credit secured by real prop- 13 erty that (together with any improvements 14 thereto) has a value of more than $200,000 (as 15 calculated based on the principal amount of the 16 loan or extension of credit and the amount of 17 downpayment, if any); 18 ‘‘(B) originates not more than 20 residen- 19 tial mortgage loans or extensions of credit, 20 where— 21 ‘‘(i) each such residential mortgage 22 loan or extension of credit is secured by 23 real property that (together with any im- 24 provements thereto) has a value of 25 $200,000 or less (as calculated based on 26 VerDate Sep 11 2014 17:57 Jan 16, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5614.IH H5614 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 5614 IH the principal amount of the loan or exten- 1 sion of credit and the amount of downpay- 2 ment, if any); and 3 ‘‘(ii) at least one of such residential 4 mortgage loans or extensions of credit is 5 secured by real property that (together 6 with any improvements thereto) has a 7 value of more than $100,000 (as calculated 8 based on the principal amount of the loan 9 or extension of credit and the amount of 10 downpayment, if any); 11 ‘‘(C) originates not more than 30 residen- 12 tial mortgage loans or extensions of credit, 13 where each such residential mortgage loan or 14 extension of credit is secured by real property 15 that (together with any improvements thereto) 16 has a value of $100,000 or less (as calculated 17 based on principal amount of the loan or exten- 18 sion of credit and the amount of downpayment, 19 if any); and 20 ‘‘(D) only originates residential mortgage 21 loans or extensions of credit that are with re- 22 spect to property that is owned by such person. 23 VerDate Sep 11 2014 17:57 Jan 16, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5614.IH H5614 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 5614 IH ‘‘(2) MANUFACTURED HOME SELLER 1 FINANCERS.—Any person (other than a depository 2 institution) who, during any 12-month period— 3 ‘‘(A) originates not more than 30 loans or 4 extensions of credit that are primarily for per- 5 sonal, family, or household use and that are se- 6 cured by a security interest on a manufactured 7 home (as defined under section 603 of the Na- 8 tional Manufactured Housing Construction and 9 Safety Standards Act of 1974); and 10 ‘‘(B) only originates residential mortgage 11 loans or extensions of credit that are with re- 12 spect to property that is owned by such per- 13 son.’’. 14 SEC. 4. EXCEPTION FOR SELLER FINANCERS IN THE DEFI- 15 NITION OF MORTGAGE ORIGINATOR. 16 Subparagraph (E) of section 103(dd)(2) of the Truth 17 in Lending Act (15 U.S.C. 1602(dd)(2)) is amended— 18 (1) by redesignating subparagraphs (F) and 19 (G) as subparagraphs (G) and (H), respectively; 20 (2) by amending subparagraph (E) to read as 21 follows: 22 ‘‘(E) does not include, with respect to a 23 residential mortgage sale, a person or entity 24 (including a corporation, partnership, propri- 25 VerDate Sep 11 2014 17:57 Jan 16, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5614.IH H5614 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 5614 IH etorship, association, cooperative, estate, or 1 trust) if— 2 ‘‘(i) such a person or entity provides 3 seller financing, in a 12-month period, for 4 the sale of— 5 ‘‘(I) no property where the loan 6 or extension of credit is secured by 7 real property that (together with any 8 improvements thereto) has a value of 9 more than $200,000 (as calculated 10 based on principal amount of the loan 11 or extension of credit and the amount 12 of downpayment, if any); 13 ‘‘(II) not more than 20 prop- 14 erties, where— 15 ‘‘(aa) each such loan or ex- 16 tension of credit is secured by 17 real property that (together with 18 any improvements thereto) has a 19 value of $200,000 or less (as cal- 20 culated based on principal 21 amount of the loan or extension 22 of credit and the amount of 23 downpayment, if any); and 24 VerDate Sep 11 2014 17:57 Jan 16, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5614.IH H5614 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 5614 IH ‘‘(bb) at least one such loan 1 or extension of credit is secured 2 by real property that (together 3 with any improvements thereto) 4 has a value of more than 5 $100,000 (as calculated based on 6 principal amount of the loan or 7 extension of credit and the 8 amount of downpayment, if any); 9 and 10 ‘‘(III) not more than 30 prop- 11 erties, where each such loan or exten- 12 sion of credit is secured by real prop- 13 erty that (together with any improve- 14 ments thereto) has a value of 15 $100,000 or less (as calculated based 16 on principal amount of the loan or ex- 17 tension of credit and the amount of 18 downpayment, if any); and 19 ‘‘(ii) each piece of real property de- 20 scribed under clause (i) is owned by such 21 a person or entity and serves as security 22 for the loan or extension of credit, provided 23 that such loan or extension of credit— 24 VerDate Sep 11 2014 17:57 Jan 16, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H5614.IH H5614 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 5614 IH ‘‘(I) is not made by a person or 1 entity that has constructed, or acted 2 as a general contractor for the con- 3 struction of, a residence on the prop- 4 erty in the ordinary course of business 5 of such person, corporation, associa- 6 tion, estate, or trust; 7 ‘‘(II) is fully amortizing; 8 ‘‘(III) is with respect to a sale 9 for which the seller determines in 10 good faith and documents that the 11 buyer has a reasonable ability to pay 12 the seller; 13 ‘‘(IV) has a fixed rate or an ad- 14 justable rate that is adjustable after 5 15 or more years, subject to reasonable 16 annual and lifetime limitations on in- 17 terest rate increases; and 18 ‘‘(V) meets any other criteria the 19 Bureau may prescribe;’’; and 20 (3) by inserting after subparagraph (E) the fol- 21 lowing: 22 ‘‘(F) does not include, with respect to a 23 residential mortgage loan or extension of credit, 24 a person or entity (including a corporation, 25 VerDate Sep 11 2014 17:57 Jan 16, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H5614.IH H5614 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 5614 IH partnership, proprietorship, association, cooper- 1 ative, estate, or trust) if— 2 ‘‘(i) the loan or extension of credit is 3 seller financed and is a consumer loan or 4 extension of credit secured by a security 5 interest on a manufactured home (as de- 6 fined under section 603 of the National 7 Manufactured Housing Construction and 8 Safety Standards Act of 1974); and 9 ‘‘(ii) each home described under 10 clause (i) is owned by such a person or en- 11 tity and serves as security for the loan or 12 extension of credit, provided that such loan 13 or extension of credit— 14 ‘‘(I) is not made by a person or 15 entity that has manufactured the 16 manufactured home; 17 ‘‘(II) is fully amortizing; 18 ‘‘(III) is with respect to a sale 19 for which the seller determines in 20 good faith and documents that the 21 buyer has a reasonable ability to pay 22 the seller; 23 ‘‘(IV) has a fixed rate or an ad- 24 justable rate that is adjustable after 5 25 VerDate Sep 11 2014 17:57 Jan 16, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H5614.IH H5614 pamtmann on DSKBC07HB2PROD with BILLS 10 •HR 5614 IH or more years, subject to reasonable 1 annual and lifetime limitations on in- 2 terest rate increases; and 3 ‘‘(V) meets any other criteria the 4 Bureau may prescribe;’’. 5 SEC. 5. REPORT ON SELLER FINANCING. 6 (a) STUDY.—The Secretary of Housing and Urban 7 Development and the Secretary of the Treasury shall 8 jointly carry out a study on— 9 (1) the number of homes bought for under 10 $200,000 or 60 percent of the median home value 11 in a given community, whichever is lower, in the 12 United States by utilizing seller financing described 13 under section 2; 14 (2) the number of homes described under para- 15 graph (1) financed by licensed mortgage brokers or 16 depository institutions; 17 (3) the potential number of homes described 18 under paragraph (1) which could be financed by li- 19 censed mortgage brokers or depository institutions 20 but are not, because seller financiers are unwilling, 21 or from a practical standpoint unable, to comply 22 with mortgage broker rules; and 23 (4) the potential benefit to home values, neigh- 24 borhood stabilization, and family wealth creation 25 VerDate Sep 11 2014 17:57 Jan 16, 2020 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H5614.IH H5614 pamtmann on DSKBC07HB2PROD with BILLS 11 •HR 5614 IH through affordable homeownership if more homes 1 are able to be sold utilizing seller financing. 2 (b) REPORT.—Not later than the end of the 1-year 3 period beginning on the date of the enactment of this Act, 4 the Secretary of Housing and Urban Development and the 5 Secretary of the Treasury shall jointly issue a report to 6 the Committee on Financial Services of the House of Rep- 7 resentatives and the Committee on Banking, Housing, and 8 Urban Affairs of the Senate containing— 9 (1) all findings and determinations made in car- 10 rying out the study required under subsection (a); 11 and 12 (2) data on the number of transactions utilizing 13 seller financing 20 years, 15 years, 10 years, and 5 14 years prior to the date of the enactment of this Act. 15 Æ VerDate Sep 11 2014 17:57 Jan 16, 2020 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6301 E:\BILLS\H5614.IH H5614 pamtmann on DSKBC07HB2PROD with BILLS