Exclusion #2 – Rules for Owner Financing in NM

Exclusion #2

Here are the guidelines for those who plan to sell up to three properties in a 12 month period.

1. The person provides seller financing for the sale of three or fewer properties in any 12 month period to purchasers of such properties, each of which is owned by the person and serves as security for the financing. A person includes a natural person, trust, estates, LLC, S-Corp, partnership, etc.

2. The person has not constructed, or acted as a contractor for the construction, of a residence on the property in the ordinary course of business of the person.

3. The person provides seller financing that meets the following requirements:

a) The financing is fully amortizing. A balloon payment is NOT permitted

b) The financing is one that the person determines in good faith the consumer has a reasonable ability to repay. This regulation does not require retaining documentation of the determination. There is no standard for debt to income ratio or credit score.

c) The financing has a fixed rate or an adjustable rate that is adjustable after five or more years, subject to reasonable annual and lifetime limitations on interest rate increases and provides for the rate to be determined by the addition of a margin to an index rate based on a widely available index such as US Treasury or LIBOR. An annual rate increase of up to two percent with a lifetime cap of 6 points is considered reasonable.