Note Investing Tools Interview: Call The Underwriter RMLO


How do you create notes and stay compliant? Call The Underwriter! Note Investing Tool interviewed Russ O’Donnell, an experienced RMLO, to see how he is helping sellers provide financing in all 50 states with his underwriting and disclosure services.

5 Keys to Staying Dodd Frank Compliant

Get Dodd-Frank Compliant

In a Seller Finance Transaction

Staying Compliant, as a lender, in today’s litigious society can be like walking through a minefield. One wrong move and you can say goodbye to your assets. These 5 keys will not only help ensure compliance with Dodd Frank, but help provide the best overall customer experience for your new buyer.

1. Becoming, or hiring, an RMLO (residential mortgage loan officer) – it is highly recommended that you contact an attorney to determine your specific needs as an investor in this area. In general, the SAFE ACT requires a person originating more than 5 loans in a 12 calendar month period to be a licensed RMLO, or hire such a person/entity. 5 loans or less, no license required. However, you are still responsible to follow all disclosure (RESPA), and both state and federal lending laws. Once the loan terms have been agreed upon between you and the buyer, you can proceed.

2. Complete Loan Application – Success in life is foundational. The 1003 mortgage loan application is the foundation to your seller-finance transaction. It will help you determine, quickly, whether you or not you have a potential buyer, or someone you’re about to waste a lot of time with. The key is to have the buyer fill it out. All of it. 2 years residence history, and 2 years employment history. No gaps. No blank spaces. Make sure it’s legible. All pages.

3. Key Questions – asking a few very basic questions is essential in vetting a potential buyer:

“Have you been current on all housing payments over the most recent 12 months?”
If the buyer says no, and doesn’t have an acceptable explanation, you need to move onto the next applicant. Prior rental history is very important. If the buyer says yes, ask them if it can be verified by their landlord. If the buyer says no, you need to move onto the next applicant. If the buyer says they live with their family and don’t pay rent (unless they just sold a home or recently relocated) you may need to move onto the next applicant.
“What’s preventing you from obtaining an FHA or Conventional loan?”
If the buyer says it’s due to credit, ask them what’s wrong. You’re trying to find out if it’s a recent life event, such as job loss, divorce, etc., or if they just don’t like paying people back. If it’s the latter, you need to move onto the next applicant.
“How do you earn income, and can it be verified in writing?”
If the answer is clear, and they are willing to provide recent paystubs and W2s (or tax returns if self employed) that’s good (see our CTU Submission Checklist on exactly what documents to collect depending on how they earn income). If they indicate they get paid in cash, you need to move onto the next applicant.

4. Collecting Income Documents – following the CTU Submission Checklist will make gathering buyer income documents very simple. This will also ensure you’ve collected exactly what is required by Dodd Frank and the CFPB to accurately determine the buyer’s Ability to Repay to proposed loan.

5. Credit Report – we strongly recommend that seller financiers pull a credit report and review it with the buyer. Dig in and ask questions. While some issues are expected (after all, they are coming to you because they don’t qualify for traditional financing), serious delinquency must not be ignored. For example, if the buyer is 2 months delinquent on an open car loan, how can they possibly be in a position to buy a home? This is how you get the whole story, which is needed before you go into a long-term agreement with a potential buyer.

Assuming the buyer makes it through step 5, you’re now ready to underwrite the potential loan. What? You’re not an underwriter? You thought hiring an RMLO is all you needed to do to be compliant? Listen, RMLO’s are not underwriters. They’re sales people.. just like you. An RMLO is required (unless you’re licensed) to help you originate the loan. You still need to have it underwritten to ensure the buyer can actually afford the new payment. This is call ‘Ability to Repay’, or ATR as the CFPB likes to call it. And, if you don’t certify the buyer has it, then, in the event of default, you risk having your lien invalidated should you try to foreclose and the buyer hires a smart attorney.

Questions? Contact us or call us at (480)388-6018

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Russ O’Donnell Is A Guest On The Kevin Shortle Show


Your business should be running in full compliance. If not, you’re putting everything potentially at risk because all it takes is one person making a complaint, turning it into an audit, and you’ll find yourself with a very big problem. Many investors think that if they hired an RMLO, they are covered. Russ O’ Donnell, the CEO and Founder of Call the Underwriter, talks about compliance and the role of underwriting in doing that. He outlines the services they provide to help investors comply with the Consumer Financial Protection Bureau, or CFPB, and avoid the possibility of having a problem in the future.

Russ O’Donnell Is A Guest On The Kevin Shortle Podcast

Tips For A Fast Underwriting

How long does underwriting take? Underwriting—the process in which mortgage lenders verify your assets to get a home loan—can last a little as two to three days, but typically takes over a week to finish.

Underwriting happens right before you close on a house, so timing can be crucial, particularly if you want to move in by a certain date. But make no mistake: Underwriting is unavoidable. All loans go through an underwriting process before the lender can promise you the funds for a purchase.

Learn from Russ O’Donnell, CEO of Call The Underwriter, how to speed up the underwriting process. He’ll take you through the steps in just over 4 minutes.

CFPB Changes its Mission Statement

CFPB Acting Director Mick Mulvaney has officially changed the Bureau’s mission statement.

The mission statement had previously read: “The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.”

But the new statement, according to a report by, reads (with italics added to the new wording): “The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations, by making rules more effective, by consistently enforcing federal consumer financial law, and by empowering consumers to take more control over their economic lives.”

Mulvaney has indicated he aligns with President Trump’s mission to remove unnecessary or burdensome regulations, and while the recent Dodd Frank rollback did little to help private lenders and investors, it was certainly a step in the right direction.
Prior to Mulvaney’s appointment to the CFPB, the bureau made a name for itself by assessing mega-fines to mortgage lenders and real estate brokerages topping 5 billion dollars. Recent pushback from CFPB defendants has resulted in 2 federal judges ruling that the

CFPB’s structure is unconstitutional. Perhaps Mulvaney is on our side.
If Mulvaney hold true to his words, perhaps this could be the start of something big. And not just for big business.


How to Play Nice with Dodd Frank

As with all legislation, there is the issue of interpretation. In this entry, we will drill down, quickly, what the Dodd Frank Act did, why it did it, and how to comply with it as an investor or private lender.

Dodd Frank’s 849 page lending overhaul, as we’ve all seen, made it mostly impossible for smaller lending entities to stay in business. This is because it transferred the responsibility of the buyer onto you, the lender. If the buyer defaults on a mortgage loan, and it can be determined that the lender didn’t make sure the buyer had the “ability to repay” at the time of loan origination, the lender could lose their right to foreclose. This was done to try and protect the consumer against a crooked mortgage loan officer. As a result, many private lenders and investors abandoned residential, seller-financing all-together, and have long awaited repeal or new legislation to reopen the door. Trump’s recent lift did quite a bit for smaller banks and credit unions, but still requires them to service those loans and ensure their borrowers still qualify.

So how do I get back in the seller-finance, or note-buying game and stay compliant? 2 answers.

1. SAFE Act – This is the law that says you need a Mortgage Loan Officer (MLO) to originate the loan between you and your buyer. Note that if you are doing no more than 3 per year, there is an exemption to this requirement. You can find an MLO in any state by simply accessing their registrar of loan officers, or by using an entity that originates in all 50 states.
2. Ability to Repay – Dodd Frank states the lender is responsible for making sure the buyer can repay their loan. While it doesn’t tell you what interest rate to charge, or how high of a debt ratio is too high, it does recommend a few things. In fact, the CFPB issued a 59 page guide to help summarize the ACT’s requirements and how to comply. We keep a free copy of that guide on our website here, and use it regularly during our Compliance reviews. Dodd’s biggest question, during an audit, is going to be, “What underwriting methods did you use to ensure the buyer had the ability to repay your loan?” That’s it. Short and sweet. If you can’t answer that, or don’t want to become a mortgage underwriter, then simply hire one familiar with Dodd Frank.

Lastly, don’t confuse using an MLO to underwrite the transaction or to ensure your buyer has the ‘ability to repay’. That’s the underwriter’s job. MLO’s originate for food, commission, clams, Benjamins, and greenbacks. They are not underwriters and aren’t typically familiar with guidelines. They are salespeople. MLO’s help you to comply with the SAFE Act, underwriters help you to comply with the Ability to Repay. You need both.


Dodd Frank Gets a Trimming

The amendment to Dodd Frank in April brought a well-needed lift to small banks and credit unions by alleviating certain ability-to-repay requirements.  Assumedly, private lenders and investors could fall into this category of creditor, however, would still be held to the original points and fees thresholds, retain servicing, and required to verify debt, income and financial resources of the borrower.   While some say it’s not much of a lift, hopefully this will be the first of many more adjustments to come.  To view the new legislation, click here.