HR 1728! Urgent- regarding seller financing new law!

HR 1728, which has already passed in Congress, will effectively keep you from:
Selling properties with owner-carryback or wrap-around mortgages
Selling properties using land contracts or contracts for deed
Selling properties using lease/option
And, possibly borrowing private money to buy properties
You’ve seen a lot of emails recently about this bill below, but the problem is real. At BostonAREIA we have made it easy for you to do something about this, so when you’ve finished reading, you’ll find links to contact your senators and to write letters, and templates pre-loaded on the BostonAREIA website if you are a member. So keep reading, don’t ignore this, it will change real estate investing dramatically if it passes.

House Bill HR1728 is an infringement on private property rights that is likely to shut down the creative selling market. IT HAS ALREADY PASSED THE HOUSE AND IS UNDER CONSIDERATION BY THE SENATE NOW. I have attached an article written by Vena Jones-Cox about it that you should read and send to everyone you know ASAP, we need massive action on this immediately to stop it.

House Bill 1728-Why it’s Detrimental to Your Business and What to Do About it.

The U.S. Senate is considering a bill that would severely limit the way you do business as a creative investor.
The bill as written basically REMOVES YOUR ABILITY TO SELL HOUSES and carry back payments.

IMAGINE this: you find and buy an investment property for $50,000.00. A potential buyer contacts you and wants to buy it for $70,000.00, but has no down payment, or can’t get bank financing for whatever reason. You like the person and know she will be a great homeowner, so you owner finance the house for her.

Did you make a “reasonable” (whatever that means) determination as to her ability to repay?
Is your loan “fully” amortizing over 30 years?
Did you give the buyer full disclosure under federal Truth-in-Lending laws?
If not, you may have violated federal law. And these are just a few of the new, tough, lending standards trying to be imposed on YOU!

Do you think this law is fair?

That’s what I thought.

But this federal law is close to passage. It has already passed in the House and soon to be addressed in the Senate. If we act in large enough numbers, we have a shot at getting the law properly amended.

We must act urgently if we want to defeat it.

Please take the time right now to review the information below and then, PLEASE, contact your Senator. You can get your senator’s contact information here:


New Hampshire




Other states:

We think it is important enough to not only send to you, but also ask you to send it to every single person in your database that is involved with real estate. For that matter, anyone who owns his or her own home and wants to consider using creative financing to buy or sell real estate should get a copy of this and make his or her voice heard.

Thank you for taking the time to act. I think all of us are in favor of “good” housing and mortgage reform, but there are times when our government just doesn’t understand the repercussions of their actions when passing a law and we, as citizens, need to act.

Read on for more detail…
HR 1728, which you can view in its entirety here:
deals with a plethora of mortgage-related issues, mostly around limited terms and fees on residential loans. But the piece of the legislation that so deeply concerns us is in section 101(3)(e), which defines the affected principals as:
'(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. Here are the types of transactions that you would be restricted from doing more than once every 36 months:

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
Yes, there will undoubtedly by ways to continue to do business under this law-some have suggested that getting a mortgage broker’s license and then learning and following the vast new set of regulations would circumvent the “problem”. But bottom line is, this law has to be stopped and it has to be stopped NOW. Here’s why:

Congress is trying to regulate the wrong thing. The deals we make are not “loans”-they don’t involve the transfer of money, or points or closing costs or adjustable rates or any of the other things that caused 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. Regulating this will have no effect on the foreclosure crisis
It is a completely unacceptable infringement on private property rights. When I own a piece of property and find a ready, willing, and able purchaser, I should be able to control the sale of that property within the existing laws of my state, which already regulate the interest rate that I am able to charge and some of the terms of the sale. The government should not tell us that we need special licensing to sell our own properties; nor should they further regulate the terms under which we can sell or burden small investors with a new set of rules that we can’t comply with.

Not only will this new law, if passed as written, effectively choke off owner financing as an exit strategy for you, it will also take away housing choice for your buyers. 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 owner financing with a seller-and HR 1728 would greatly reduce the number of properties available in 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, will be reduced to renting until they are able to qualify for bank financing.

What to Do Right Now

This bill has already passed the house and is waiting for Senate approval. Please contact your senator via email and snail mail to let him know that this law MUST NOT PASS in its current form. You can get your senator’s contact information here:


New Hampshire




Other states:

As always in cases like this, you have an automatic handicap to overcome-the fact that you are a real estate investor and are therefore viewed as part of the problem. So when you write, don’t emphasize the nature of your business, just that you and your buyers would be greatly adversely affected by the new law.

We need THOUSANDS of these communications to go out in the next few days to have a CHANCE of stopping this in its tracks. So whether you’re a new or experienced investor, PLEASE take the time right now to write your elected representative!

Here are some sample letters or emails. If you are a BostonAREIA member, login with your member login, and go to the Library section, where there are templates you can use if you like.


Dear Senator [name];

           My name is ________________ and I am a resident of ___________.

        I am writing you to encourage you to vote NO on HR 1728, the "Mortgage Reform and Anti-Predatory Lending Act".

        While many of the provisions of the act are positive steps toward mortgage reform, the inclusion of private owners in the act (see section 101(3)(e)) will enormously reduce the housing choice of Americans and the ability of home owners to sell properties in this already-slow market.

        As a real estate broker, I have seen several dozen cases in the  past year of home sellers and buyers coming to an agreement for an installment sale on a property that the owner desperately needed to sell (often to avoid foreclosure) and the buyer desperately wanted to buy, but could not raise the down payment needed for conventional financing.

        In all cases, these sales turned out to be win-win deals for the buyer and seller; the seller was able to get rid of an unwanted property to a buyer who loved it, and the buyer was able to get his new home at an affordable payment and interest rates with none of the usual costs (points, application fees etc) inherent in more conventional mortgage transactions.

        In my state, these transactions are already regulated by state law: a low maximum interest rate is already in place, and both the buyer and seller are protected by other regulations at the state level.

        In defense of private property rights, owners should be exempted from the burdensome and unnecessary rules that this law foists upon them. In its current form, it would all but shut off the "owner financing" market that is the only way that many sellers can sell and many buyers can buy right now.

PLEASE DO NOT LET THIS RESTRICTION ON PRIVATE PROPERTY RIGHTS PASS THE SENATE. It is unnecessary to stop private buyers and sellers from transacting business that is beneficial to both of them-they are not the problem that the bill seeks to solve. HR 1728 would be extremely harmful to thousands of your constituents.

It will exacerbate the problem OF foreclosure, as fewer sellers will be able to sell their homes so they can avoid foreclosure, and fewer buyers who have recently experienced foreclosure will be able to re-start the process of home ownership inexpensively and easily by negotiating owner financing.

Thank you for your consideration;

Your name here
Licensed Real Estate Broker license #
Phone #

According to Bill Bronchi this should be ok. Check his site

I have removed the http from the following url. Hope this link will show up alright.

Hi and thanks for the response,

I have read what Bill thinks and respectfully i don’t agree with him. This places onerous burdens on the seller. There are attorneys in my Reia’s who are VERY concerned with this. So just because bill is an attorney and thinks it’s no big deal doesn’t mean that it is. It’s always good to get a second opinion on things. Personally i would prefer that the law is not passed that way we don’t have to find out whether or not it is a big deal.

BTW there is also an amendment in there that states taht the gov’t can sieze a 5+ unit multifamily if they even THINK that it is in danger of foreclosure. They will then hand it over to whomever they deem is fit to run it. This is to protect the tenants of course. If that doesn’t scare you!

Please write your senators.

Thank you,


did this bill pass into law? can’t find much updated info on it.

This particular bill did not, however, there were several similar bills circulating at the same time.

The Secure and Fair Enforcement Mortgage Licensing Act of 2008 (SAFE Act) was enacted into law on July 30, 2008, as part of the Housing and Economic Recovery Act of 2008 and contained most of the provisions of HR 1728.

so if i am understanding it correctly it does NOT affect any form owner financing since we, as investors and property owners are not loan originators?