Earlier this year, the Arizona Association of REALTORS® (AAR) removed its Assumption/Carryback Addendum from the AAR forms library and replaced it with four new forms that enabled members to better comply with the seller-financing restrictions mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).
As explained by the new forms, the Dodd-Frank Act mandates that a loan originator for a consumer credit transaction must, when required by applicable State or Federal laws, be registered and/or licensed in accordance with those laws.
The Consumer Financial Protection Bureau (CFPB) defines a consumer credit transaction as: “credit offered or extended to a consumer primarily for personal, family or household purposes.” Exempt from the definition of a consumer credit transaction is: (1) an extension of credit primarily for a business, commercial or agricultural purpose; and (2) an extension of credit to other than a natural person. See 12 CFR § 1026.2(a). As such, business, commercial, agricultural, or organizational credit transactions are not considered consumer credit transactions and are not governed by the Dodd-Frank Act’s seller-financing restrictions.
To ensure that its new seller financing addenda reflect the CFPB’s definition of a consumer credit transaction, AAR has revised the three seller financing addenda introduced earlier this year and will continue to do so as may be required to comply with newly issued regulations and policy statements. Following these revisions, the three seller financing addenda have been re-titled as follows:
- SELLER FINANCING ADDENDUM; CONSUMER CREDIT TRANSACTION SECURED BY A DWELLING – Seller Providing Financing For Only One Residential Owner-Occupied Property In Any 12-Month Period;
- SELLER FINANCING ADDENDUM; CONSUMER CREDIT TRANSACTION SECURED BY A DWELLING – Seller Providing Financing For Three or Fewer Residential Owner-Occupied Properties In Any 12-Month Period;
- SELLER FINANCING ADDENDUM; NON-CONSUMER CREDIT TRANSACTION
Additional Considerations
- Added to the addenda is a buyer verification, which will assist the seller in determining whether the transaction is for purposes of a consumer credit transaction or for exempt purposes, such as for a business, commercial, agricultural or organizational credit transaction.
- If the transaction is exempt, the parties should utilize the third form titled SELLER FINANCING ADDENDUM; NON-CONSUMER CREDIT TRANSACTION.
- If the transaction is considered a consumer credit transaction, the seller must either be registered and/or licensed in accordance with applicable laws or exempt from the definition of a loan originator under: (1) the one property exemption set forth in 12 CFR § 1026.36(a)(5); or (2) the three or fewer properties exemption set forth in 12 CFR § 1026.36(a)(4).
The three revised addenda are also now available in zipForm®.
