Those in the business of financing purchases of real estate used or to be used as a residence need to be aware of recent legislation that will affect them. The Texas Secure & Fair Enforcement for Mortgage Licensing Act Texas SAFE Act) was passed during the 2009 legislative session (HB 10). It requires certain individuals to be licensed in order to make these types of loans. Narrow exemptions do apply for those who seller-finance their primary residence or those who lend to a family member. It is important to note that the Commission for the Texas Department of Savings and Mortgage Lending has extended the deadline for seller-financers to become licensed and be in compliance with the SAFE Act until August 31, 2010. The SAFE Act, and the state legislation it has spawned, are complex and demand a thorough study for those in this type of business. For more information, visit the Department of Savings and Mortgage Lending's FAQ page at http://www.sml.state.tx.us/tdsml_faq_mb_general.html.
In 2009, on a mandate from the Federal Government, the Texas Legislature passed an act that said lenders, including private lenders and seller financing lenders, must be licensed as mortgage originators. They did provide for an exception for people who are seller financing their primary residence or those lending to a family member. (Federal Bank employees and habitat for humanity is also excluded). If the lender himself is not licensed then the transaction must go through a licensed mortgage originator. In a nutshell, a mortgage loan originator accepts applications, provides lender related disclosures and, as much as possible, negotiates the loan. Fees for loan origination can run from $300 to $500.
The Texas Department of Savings and Mortgage Lending, through its Commissioner, Douglas Foster, recently extended the deadline for seller-financers to become licensed as Mortgage Company Residential Loan Originators until August 31, 2010.
After August 31, 2010, seller-financers not choosing to go through the process to become Mortgage Originators will need to involve a licensed Originator to handle the origination of the loan.