What role does a RMLO play in the Owner Finance industry?

Scott Horne has been a real estate, title attorney, and investor for over 30 years. Over this time, he has purchased, rehabbed, and sold over 7,000 single family homes. Through his companies and law office, he has transacted over 10,000 creative finance deals. Scott’s experience as both an attorney and an investor puts him in a unique position to help you navigate this tricky business every step of the way.

Hey guys this is scott horn with the owner finance network and i’m here today with sylvia who is our new branch manager of the ofn loan processing so welcome sylvia hi scott hey so hey sylvia just tell me a little bit about how did you get started in the mortgage industry um i started in the traditional um mortgage lending arena and um once i got introduced

To the to the owner finance strategy that you developed um i was just um very impressed with the way that um you know homeowners that you know had less than perfect credit we’re able to achieve while purchasing a home and i’ve since processed thousands and thousands of buyers to this day now so you know i get the the standardized mortgage world out there

And i know that our creative world that we live in so much is so different but you’re so much on point that it’s it’s a lot of fun to help these buyers who couldn’t normally buy a home without using some type of creative finance like so many investors and sellers offer out there and to help them is just a great thing to do right absolutely absolutely so let’s

Just ask you some brief questions about you know the loan processing business that we go through in the creative finance world so first off what is this thing called an rmlo we always use these in acronyms you know that stands for residential mortgage loan originator so what is that really in the owner finance world well um back in the uh 2008 dodd-frank was

Was instilled upon this this industry and um then they made the residential mortgage loan originators have be licensed and be able to process loans for lenders okay so an rmlo stands for residential mortgage loan originator after a while you get used to saying that i guess and you know i guess that can be either for a loan processor or for a i guess a mortgage

Broker correct and it requires a state license is that right that’s right and they also give us a new national license too along with with that is that correct correct yeah okay so but do all of the mortgage industries use an rmlo um typically yes um you know um there’s some some um transactions that may not need one but for the most part yes yeah so if you’re

In a conventional loan you’re gonna get processed by an rml yes sir if you’re in a owner finance transaction you’re going to get processed by rmlo yes sir so same thing right same thing i like next i like consistency that’s out there along the way you know so often we hear and get asked these questions well do i have to process my buyer so if my buyer is an

Investor of buying a home do i need to process that investor if it’s an investment property no okay um it um you do have to do it if it’s a uh owner finance truck i mean uh a occupied owner um transaction okay well and that’s that’s easy isn’t it so if it’s business purpose or non-owner occupied not needed you can do that if you want to i guess can’t you for

Sure but if it’s going to be an owner occupant and i call that a consumer loan it’s recommended highly to process that buyer for compliance purposes i got it so tell me about the arm alone what role do they play in the owner finance industry out there what why do we have them today um you know if when you hire an rmlo um and you make that smart decision to use us

Um you’re really protecting your investment we will take a 1003 which is the loan application we’ll talk to the buyers gather all the information um we’ll um gather their income documents and um what’s you know normally the usual information that’s out in that so when you say income documents i’m assuming that means you set an application correct and guys you

Heard her say 1003 applications she didn’t say a thousand three no if you want to sound like a rookie say a thousand three but it’s really called a 1003 in the industry correct and that’s what that’s where you start and then you want to get things i guess like tax returns w2s or 10.99 so they have them maybe bank statements bank statements yes sir and sometimes

These people are paid by cash right right we have to get maybe letters from their employers that kind of stuff yes sir so you’re going to compile all this mess of information yes and put it together right correct i will pretty much give you a financial snapshot of what your buyer looks like and what their credit worthy is okay and you know one of the things i

Find interesting is is that even though the owner finance world is totally different than the conventional lending world right yes sir the loan processing is exactly the same it’s the same software and you get the same package whether you work for owner finance you know company abc or bank of america it’s the exact same stuff right it is it is it really is um

The information that we’re required to as a loan originator the information that we’re required to um get from the buyers from a traditional lending loan or from a solar finance transaction is exactly the same so you know i often try to help the sellers with the step-by-step process and there’s some things that are outside of our control specifically how rapid

These buyers get us information so if a buyer gets you information on day one what what kind of time frames can that seller look at to get this wrapped up so they can move towards closing um usually within 24 to 48 hours if we have the information from the buyers um it’s um um you know it’s a little difficult when you’re doing seller finance transactions um

Some buyers may not have all their information readily available and so but that’s that’s a a hurdle that we you know can can usually um overcome okay so let me just kind of walk through this a little bit so the buyer comes in on monday they get you what’s the first thing you do once they come in they give you a loan application um i start processing it into our

Software that we use which is calex point um and um we i start getting the initial loan disclosures after i have all the information from them i do the initial loan disclosures and disclose that loan to them now is there a time frame involved with that at all there is um that loan disclosure has to be it’s it’s called the le now but um the um loan disclosure

Has to be uh provided to the buyer um seven days within consummation of the loan so loan application comes in on monday you’ve got to provide them the disclosures and there’s at least seven days to get all these things out to them right correct once you get it all in so if the buyer is actually getting you stuff on time they actually come in on let’s say monday

With everything they need what is it is it seven days three days ten days what’s that time frame you know we have to go through to make sure we’re compliant with the real estate settlement procedures act and all these things to help out so we can move towards closing the trid law the tread rule states that we have to provide a loan estimate to the consumer seven

Days prior to consummation okay i.e when you close the loan um and uh it’s when they sign on the dotted line saying that that mortgage is now theirs there’s also a three-day waiting period when you deliver the closing disclosure uh it’s called people call it the cd now that is due three days before consummation as well so if everything works perfect minimum 10

Days and by the way we all know it never looks perfect so probably i tell people that usually if the buyer is you know johnny on the spot they’re getting stuff in quickly you know it’s minimum 10 but you need to really expect probably 14 days and it could be longer if that buyer has takes longer to get us information right exactly that is great though because i

Know so many so many sellers want to know that because they all seem to want to close the very next day and you know you just can’t do that anymore so you know tell me why do you think it is important to incorporate the rmlo into our owner finance transactions today um we gather information that you know to give you a financial snapshot of your buyer to protect

Your investment and to keep you compliant with the dodd-frank and the respo rules and you want to make sure that you have a qm report qualified mortgage is a big deal today if you’re looking at exit strategies so you know what i heard you say was protect our investment which i totally agree you know one of who our borrower is and what their abilities are and

That tells me make sure our buyer can afford the monthly payment right correct you know what we don’t want to do is oversell a house to somebody i know there’s some investors all they care about is getting a down payment but really it’s more than that it’s we want to make sure our borrower has the ability to for uh to afford that monthly payment right the ability

To repay and you know when you give me that that that um report that you could prepare it tells me all right there like on the first one or two pages everything i need to know doesn’t it correct it’s a summary of um their what they can afford monthly what their monthly payment is going to be their dti and what’s a dti dti is the debt to income ratio okay so

It tells you all this debt to income ratio we get an application uh it tells us what their income is and things of that nature so we’re able to look at this and really make an informed decision pretty quick right correct now that’s awesome so just real quick when someone comes to you to do a loan processing package what’s the cost associated with that um our

Fee is 850 um and that that fee per um is passed on to the buyer we will collect 300 upfront when we do the initial loan disclosures and collect the intent to proceed at that point we we will collect the 300 and the remainder of the fee is um collected at closing okay and you know that 300 bucks is pretty important because you do pretty much all of your work up

Front anyway right correct so really you’re you’re offering a benefit to that buyer to pay the balance the fees when they buy the home not really as you’re doing the work correct but again you know to me eight hundred dollars that’s a pretty cheap amount of money to make sure you’re doing the right thing protecting your investment and those kind of things right

Absolutely well that is great so guys come see us at ofn loan processing sylvia looks forward to helping you out in all your transactions we’ll see you then

Transcribed from video
What role does a RMLO play in the Owner Finance industry? By The Owner Finance Network