Learn the truth about who must be licensed and other aspects of the SAFE Act.
On July 30, 2008, President Bush signed into law the Secure and Fair Enforcement for Mortgage Licensing Actâ€”the SAFE Act. This federal law mandated that within one year, all states must pass uniform legislation to adopt minimum licensure provisions for originators of mortgage loans. The SAFE Act also required participation by state agencies in the Nationwide Mortgage Licensing System and Registry (NMLS).
In addition, the SAFE Act required states to adopt provisions related to seller financing. Here are some myths about this requirement as well as the information to clear them up.
Myth: Seller financing is no longer allowed in Texas.
Fact: Seller financing is still allowed in virtually all real estate transactions. However, as of May 31, 2010, if a seller is financing a one-to-four-family residential transaction other than his primary homestead or a sale to a family member, he must be licensed as a residential mortgage loan originator (RMLO). In other words, transactions involving investment property, second homes, and vacation homes require licensure as a RMLO.
Myth: A person must now be licensed as an RMLO to provide seller financing for commercial and unimproved property.
Fact: Sellers do not have to be licensed as an RMLO to provide seller financing for commercial real estate or unimproved property.
Myth: There’s an exemption for people who provide seller financing in five or fewer transactions during a 12-month period.
Fact: That exemption is no longer valid.Â As of May 31, 2010, the only exemptions are for people selling their own homestead or selling to a direct family member.
Myth: The state of Texas is responsible for this expanded licensure.
Fact: The new licensure requirements originated in the federal SAFE Act.
Myth: A real estate agent or broker needs to be licensed as an RMLO if she wants to represent a client who is providing seller financing for a home.
Fact: The licensing requirement only applies to the person providing the seller financing.
Myth: Real estate agents and brokers are exempt from the SAFE Act.
Fact: There is no exemption for real estate licensees. If a real estate agent or broker wants to provide seller financing for a home, that agent or broker must be licensed as an RMLO.
Myth: The statute doesn’t specifically call for licensure of people providing seller financing, so it can’t apply to individuals providing seller financing a few times a year.
Fact: The statute requires everyone who provides financing for a one-tofour-family residence to be licensed. There are two exemptions: 1) A person selling his primary residence; 2) A person selling to a direct family member. Anyone who does not meet one of those two exemptions is committing a misdemeanor offense by providing seller financing even once for a one-to-fourfamily residence.