Seller-financing Rules You Need To Know

Recently the market for consumer credit has shown signs of significant turmoil; stricter guidelines

, higher capital requirements and lack of mortgage insurance, just to name a few. Through it all there are still some sellers that have enough equity in their property and or liquid assets to be able to lend to purchasers of their real estate. The question remains; are they able to seller-finance under the current law?

In July of 2008 President George W. Bush signed a law that was to become known as The SAFE Act (Secure and Fair Enforcement of Mortgage Licensing Act). Under that federal statute all states were required to enact uniform legislation within one year or the federal government would step in and enact it on behalf of the state. During the 2009 legislative session Texas complied with this federal statute.

The primary purpose was to place minimum licensing requirements on all Residential Mortgage Loan Originators (RMLO) and requires all states to participate in the Nationwide Mortgage Licensing System and Registry. To seller-finance one-to-four residential property in Texas the seller must now be licensed as a residential mortgage loan originator (RMLO).

Under the old statute there was a de minimus exemption wherein a seller could offer to lend to the purchaser on the sale of a one-to-four residential property up to 5 times in any rolling calendar year. This exemption has now been completely removed.

There are only 2 exemptions under the current statute; if the seller is offering to seller-finance a property that is being sold to an immediate family member or if the property they are selling is the seller's homestead.

In order to seller-finance, all sellers will be required to meet the minimum standards required of a RMLO; applicants will be required to get education, submit fingerprints for a background check, sit for an exam and demonstrate some level of credit worthiness.

This affects homes for sale in Houston Texas offering seller-finance options similarly to any other state. Consult with your local real estate expert or legal counsel if you have any questions on how this particular law may effect you.

by: Joshua La Force

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