Pearce Introduces Bill to Improve Access to Housing for Rural Communities

Press Release

Congressman Steve Pearce introduced H.R. 5287, the Preserving Access to Rural Installment Transactions for Years (PARITY) Act, to improve access to safe and affordable housing for people in rural communities. Due to new federal government regulations, banks in rural towns across the nation have exited the market, leaving potential homeowners with few credit options for financing their purchase. This bill offers an alternative to these regulations and prevailing market interest rates by restoring the ability of an owner to self-finance a home for the prospective buyer directly.

"Since the housing crisis in 2008, people in rural communities have been paying the price for what happened on Wall Street. Today, burdensome regulations on mortgage credit has led potential homeowners with nowhere to turn for credit options. For states like New Mexico, this change has hit our communities hard. That is why I've introduced the PARITY Act to increase housing opportunities to moderate and low-income families, as well as first time home buyers. This bill also makes it easier for people like Ma and Pa who want to sell their property in retirement to do so, without removing any safeguards that protect consumers against abusive lending practices," stated Rep. Pearce. "As someone who not only grew up in a rural town, but who also had a manufactured house as my first home, I understand the importance of multiple options for safe and affordable housing options in rural communities. It is my hope that this bill will serve as a solution for many sellers and potential homeowners throughout New Mexico and across the nation."

Background
H.R. 5287 amends the Truth in Lending Act to exempt from the definition of loan originator a seller providing financing for the sale of five or fewer properties in a 12-month period, of which the property is owned by the seller and used as security for the loan. Qualifying sellers include persons as well as entities, such as corporations, partnerships, proprietorships, associations, cooperatives, estates, and trusts.

Seller financing, also known as owner financing, is a type of financing where a property buyer finances the purchase directly through the person or entity selling it. Sellers agree to receive their equity in their property from the buyer in an installment sale, and the buyer and seller negotiate the terms of the sale; including the sale price, down payment, monthly payment, interest rate and amortization. The seller receives payments while the buyer gets the benefits of owning a property.

This type of financing is often used when the prospective buyer cannot obtain funding through a conventional mortgage lender, or is unwilling to pay the prevailing market interest rates. These transactions are common in the south and west, as properties in less populated areas often have features that do not easily fit the underwriting requirements of the Federal Housing Authority (FHA) and Government Sponsored Entities (GSEs) requirements; including older manufactured housing, homes located on larger acreages, and unique homes such as mountain cabins or other rural homes that do not include modern conveniences but are desirable to a buyer.

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