Simplifying Seller Finance

Seller finance compliance feels messy because multiple rule sets overlap and the gray areas are real. In this episode, I break down the essentials—Dodd-Frank Ability-to-Repay (ATR), TRID timelines, and the "Rules of 1, 3, and 5"—and show you how to keep deals simple, compliant, and sellable.

Key takeaways

• Dodd-Frank ATR (the big one): If your borrower is an owner-occupant, you must make a good-faith determination they can repay (credit, income, debts, residual income). You want to underwrite anyway—this protects you and improves loan performance.

• TRID basics: Send a Loan Estimate (LE) ≥ 7 business days before closing and a Closing Disclosure (CD) ≥ 3 business days before closing. Disclosure reduces misunderstandings and defaults.

• Rules of 1 / 3 / 5 (why the myths persist):

  • "1 per year": Only applies to natural persons selling their own primary residence (not investment deals or entities). Not the "do anything you want" rule most think it is.

  • "3 per year": You can create up to 3 loans/year without involving an RMLO, but ATR still applies. Not Wild West.

  • "5 per year": You can do up to 5 loans/year without TRID, but if you're already doing ATR with an RMLO, you'll typically do TRID too—there's no reason not to.

• Why follow ATR + TRID even when not strictly required:

  1. Better underwriting → fewer defaults

  2. Easier to sell (and at higher prices) to institutional buyers

  3. Enforceability if a borrower contests in court

  4. Costs are typically passed to the borrower at closing

• Servicing tip: For owner-occupied loans, use a third-party servicer. Compliance on servicing is even stricter, and you can contractually pass the monthly fee to the borrower.

Resources mentioned

• 📄 One-Page Seller Finance Rule Guide (free) — quick reference you can keep on your desk

• 🤖 Note Copilot AI — my private GPT trained on 160+ sources (Note L