Frank Dodd Penalties in 2014

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The Frank Dodd Act goes fully into effect January 2014. The magic number in most states will be 3. Do more than 3 deals and you’re going to face some penalties.

Two days ago, we reviewed out the Frank Dodd Act worked and who needed to watch out. Yesterday we talked about some strategies to avoid the problems.

But let’s say you just don’t want to jump through any hoops and you plan to do more than 3 deals. What happens then?

Well, according to Frank Dodd, you have to become or use a licensed
mortgage loan originator on the 4th and subsequent deals. You’ll have to collect evidence from the buyer/borrower that they have the ability to repay. That means you must document it. You’ll need to collect and review tax returns, W-2s, bank statements and so forth.

But let’s say you just don’t comply. What then? Are the Feds going to be chasing down real estate investors for this? No, the SAFE Act already covers that at the state level. What the Dodd-Frank Act does is provide a buyer who is being foreclosed or evicted with a counterclaim recouping all their interest paid, plus their down payment, attorney’s fees, and court costs.

In conclusion, you can do one deal per year as a natural person or trust, three deals per year in an entity without being licensed under Dodd-Frank. However, if your state has no exemption under the SAFE Act, you still have to use a licensed mortgage loan originator on EVERY deal. If you don’t play by the rules, the feds aren’t going to come after you, but your borrower may be able to sue and end up with your house, worst case.

Want to learn more? Go to for a webinar replay I did with real estate attorney Bill Bronchick on this and other important seller financing tips.

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