Seller Financing has become more popular over the past couple of years as the lending rules have become more strict. However, did you know that as of May 2010, a Seller must be LICENSED in order to finance a property for a buyer??
Back in July of 2008, President George W Bush signed into law the SAFE Act, Secure and Fair Enforcement for Mortgage Licensing Act. The SAFE Act was to be implemented on the state level within one year, and in Texas, that was done during the 2009 legislative session.
There are two exceptions to the new law. The first one is if the home is currently the Seller's primary residence, and the second is if the Seller is financing for a family member.
What does this mean?
This means that Investors that own multiple properties and like to seller finance for people who have less than stellar credit, or even people with good credit, can no longer provide this service without being a licensed RMLO, Residential Mortgage Loan Originator.
What are the consequences? In Texas, this is a misdemeanor offense...
What I find interesting is that one of the requirements to obtain the license to become an RMLO is "creditworthiness". I would assume this means that even if the Seller has buckets of cash ready to lend people, if his background check and fingerprints come back in a negative way, he can't proceed. He'll just have to sit on all the cash and invest somewhere else...
And most importantly, BUYER BEWARE!! Just because the Seller offers to finance for you, it doesn't mean he's legally allowed to do it. Do your homework as well!
**Are You Packed Yet?**
Donna Harris, REALTOR®
RE/MAX Austin Skyline
www.DonnaHomes.com
Donna@DonnaHomes.com
Austin TX Real Estate and the surrounding areas of Lakeway, Bee Cave, West Lake Hills, Cedar Park, Round Rock, Spicewood, Circle-C, Steiner Ranch, and everywhere in between... Hill Country Austin TX Real Estate and beyond. Whether you're buying or selling an Austin home, I'll be with you every step of the way.
For real time Austin TX listings, click here.
** #1 Agent in my Office for all of 2008 **
Copyright© 2010 By Donna Harris, All Rights Reserved. You may re-blog with links back to this post.
* Seller Financing Has New Rules - SAFE Act Implemention * was first published on donnahomesblog.com
there is a lot of fun behind the SAFE act! The seller financing piece is not a big one (at least in NJ) If it is not a recurring thing or just a 1 time thing then the seller does not need the NMLS ...
But did you know that Loan officers that work for a bank do not need to be licensed? The do not need to have continuing education, the do not have to pass a test, and they do not need credit or back ground checks?
All Mortgage Bankers and Mortgage Brokers are required to have 20+ hours of class time prior to taking the Federal and State Tests, and our test scores are public records, Most states require 8 hours of continuing Ed after the test, (and NJ 12 hrs). and we need to be finger printed, poked, proded etc.... Be careful who you refer your business too! If they do not have an NMLS ID# they probably couldnt pass the tests!
Donna: Yikes! I would think there should be a threshhold of some sort at which point licensing would be required... But under most circumstances, if the seller and financier are the same person in the transaction, I really can't see the need to require a license. How many mortgage bankers are going to start buying homes just so they can broker mortgages on them? That's a pretty silly concept. Thanks for sharing!
Donna
Thanks for sharing the information, I was not aware of the law.
Good luck and success.
Lou Ludwig
Robert, The SAFE Act doesn't not allow just for a "one time" thing anymore unless it's a primary residence or family member. I think it's going to change a lot in the lower end prices where those buyers were depending on sellers to finance because they had/have bad credit.
David, I can see how a buyer could later cry fowl and say he was being taken advantage of, and the license would hold the seller to a higher standard... maybe?
Lou, You're welcome.
Ignorance in action.. makes no sense.
WOW, Donna ---- I was not aware of this -- I must check to see if SC has implemented this. Thanks.
I hate to be this way but every time a bill gets passed our state has to invent 3 more forms to protect the consumer instead of a paragraph on the finance addendum...
I hope you had a day of success Donna!
Paul
Greg, It's the seller's money, why can't they do what they wish with it?
Liz, I think every state has to have it implemented this year... but not sure.
Paul, I know what you mean...
Wasn't aware of this law -- thanks for enlightening me.
I was not aware of this law, Donna! Thanks for the post!
Here's an update straight from TAR dated June 24.
Seller-financing license requirements delayed
The federal Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act requires most property owners who wish to seller-finance to be licensed as residential mortgage loan originators (RMLO). The Texas Department of Savings and Mortgage Lending, responsible for the act's implementation in Texas, announced last week that it's delaying the licensing deadline from May 31 to Aug. 31.
This delay is the first step toward reinstating the de minimis rule, which allows a seller to finance the sale of up to five properties within 12 months without a license. The Texas Finance Commission will consider a rule change reinstating the de minimus rule at its August meeting. This is good news for private-property owners and Texas REALTORS®.
Learn more about the SAFE Act and what these changes could mean for your transactions by listening to Texas REALTOR® Update Episode 77.
The updated wording for the Federal Banks ("agency related institutions) to get their people registered is:
The final rules take effect on October 1, 2010. The agencies anticipate that the registry could begin accepting federal registrations as early as January 28, 2011. Employees of agency-regulated institutions must not register until the agencies instruct them to do so. The agencies will provide an advance announcement of the date when the registry will begin accepting federal registrations, and agency-regulated institutions and their applicable employees will have 180 days from that date to comply with the initial registration requirements.
This is why the 2nd amendment is very important