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How the Dodd-Frank Act Changes Home Financing: An Interview with Richard Miller of Miller, Crosby & Miller, P.A.

By Richard Miller

Please tell us a little bit about your firm and the areas of law that you practice.

Miller, Crosby & Miller, P.A. is a full-service law firm established in 1985. The firm is comprised of two shareholders, Samuel G. Crosby and Richard A. Miller. Mr. Crosby is a board certified commercial trial lawyer and Richard A. Miller is a board certified real estate lawyer. Both Sam and Rick have been practicing in Polk County for over 30 years. The firm has one associate, Cory Chastang, who is board certified in criminal law. The firm and its two shareholders are rated "av" by Martindale-Hubbell, the oldest and most prestigious rating system of firms and attorneys in America. An av rating is the highest rating that can be achieved.

I realize the Dodd-Frank Act might be fairly involved, but can you briefly explain the what it is?

The Dodd-Frank Act is a law passed in 2010, named after Barney Frank, a former congressman from Massachusetts, and Christopher Dodd, a former senator from Connecticut - the two lawmakers who authored the law. The scope of the law is enormous. The law itself is 848 pages and the rules and regulations interpreting the law are in excess of 14,000 pages. The law's primary purpose was to address the excesses in the marketplace, which led to the real estate bubble and subsequent collapse, and, specifically, to provide legislation that would eliminate the taxpayers bailing out "too big to fail" banks and financial institutions.

Is there something about the Act that might be easy for people to misunderstand?

Since passage of the Dodd-Frank Act, banks and other financial institutions have huge regulatory burdens to overcome to assure that loans which are made satisfy the criteria established in the law. Sanction for violations of the law are extremely punitive and banks will err on the side of caution when deciding whether to make a loan to a customer on a primary residence. The net result is higher bank fees and fewer loans as a result of the regulatory costs and burdens placed on banks.

What is one of the biggest changes for current homeowners?

The Dodd-Frank Act does not affect every loan transaction-it affects only those involving one's primary residence. Thus, it is not relevant to investment or commercial purposes.

What could this mean for potential home buyers?

A significant effect of the Dodd-Frank Act for current homeowners will be the new costs and hurdles to get financing. It will be a longer, more difficult and more costly process.

What advice do you have for Florida residents who will be affected by the Frank-Dodd Act?

Despite the issues referenced above, the most significant effect of Dodd-Frank for homeowners is owner financing. Those prospective sellers who desire to sell their home and finance the sale, or those prospective buyers looking to buy and have the seller hold a mortgage are finding their options are limited. One who owns property can finance the sale of three properties in any 12-month period but the seller must not have constructed the home under contract, the financing must be fully amortizing (no balloon) and the loan must have a fixed interest rate or an adjustable interest rate with "reasonable" lifetime limits. The rule does allow for a balloon if only one home is sold in a 12-month period.

While this rule may not sound so bad for isolated sellers and buyers, it has completely shut down those who make a living buying and selling property with the idea of holding purchase money mortgages. And many, if not most, of the folks who buy from these sellers can't qualify for conventional financing. The result is an entire class of people must now rent rather than buy.

Perhaps the most insane result of Dodd-Frank was the failure of its authors to exempt family members - a parent or grandparent can't finance or participate in the financing of a home for a child or grandchild if the parent or grandparent intends to hold a mortgage on the property.

What's the best way for people to contact your firm?

I can be contacted by telephone at 863-688-7295:29) or by e-mail at rmiller@mcmpalaw.com.

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