Last week we posted about the Consumer Protection Finance Bureau’s (CFPB) efforts to go after contracts for deed. National REIA released the following statement as a response to their effort:
In a classic federal government agency overreach, the twice-determined-as-unconstitutional CFPB has ignored history and the 10th Amendment in order to weigh-in on an area of housing contracts reserved for the states and private contracts.
Contracts-for-deed, or land installment contracts, are common in many parts of the U.S., especially among the unbanked. They are very common among the urban core and very rural residents. In the early 20th century this was the primary venue for many minorities, especially in the black community, to purchase a house as the federal government opposed minority housing financing – until the Supreme Court, which the CFPB ignores, put a stop to it repeatedly.
U.S. citizens would be far better served by a CFPB that performed actual reports and recommendations based upon state law to state-based consumer protection bureaus and legislatures rather than trying to subvert the 10th amendment and take over private contracts for real estate in every state with one regulation – remember the recent Chevron Deference case?
As to the recommendation that the Truth in Lending Act (TILA) applies, it is interesting to note that CFPB relies on Dodd-Frank and the specifically the ‘systemic risk’ factor as a justification for application of TILA – especially when CFPB has already stated that individual buyers selling their OWN property do not constitute a systemic risk!
Finaly, the use of the term “balloon payment” loan as justification for and denigration of contract-for-deeds is highly misleading. In fact, almost every commercial loan is a “balloon loan” in that the amortization is longer than the payment window. For example, a property purchased with a 25-year amortization and a 5-year note – requires the creditor (bank) and debtor (purchaser) to revisit the loan in 5 years for a refinance or even a movement of the loan. This is how Canada handles residential housing loans. The denigration of this form of widely used loan speaks to the deceptive practice and effect of the CFPB on this effort. Shameful.
Charles Tassell, COO, National REIA
Click here to read “CFPB Goes After Contract for Deed Agreements.”
The National Real Estate Investors Association (National REIA) is a 501(c)6 non-profit association that has been representing the real estate investing industry for 35 years. With over 40,000 members and 120 local Chapters and affiliates, we are housing providers that help to rebuild communities, one house at a time. We thank our industry partner Home Depot for their support. To learn more visit www.nationalreia.org
