SAFE Act for Texas – Update

Here’s some information the Texas Association of Realtors released regarding the Texas SAFE Act. Looks like good news for investors.

According to Texas Association of Realtors,

“Doug Foster, the Commissioner of the Texas Department of Savings and Mortgage Lending, announced that his agency is delaying the SAFE Act seller financing requirements until August 31, 2010.”

This is the first step in his attempt to reinstate the de minimis rule (no license required to seller finance 5 or less in a 12 month period) Texans have for so long enjoyed.

Next steps per Commissioner Foster to reinstate the exception in Texas:

  1. At its August meeting, the Texas Finance Commission will consider adoption of a rule to exempt from the SAFE Act seller financers who do five or less transactions in a 12 month period.
  2. Legislation will be sought next session to put the five or less exemption in statute. (It is already in Ch. 156, Finance Code, but it needs to be added to Ch. 180 (Safe Act) which trumps Ch. 156.) He will need our help on this.

Commissioner Foster has been in verbal discussion with HUD on this issue, although HUD has not provided anything in writing at this point. While Commissioner Foster is awaiting written confirmation, he stated he is confident that this step will not invalidate Texas compliance with the federal requirements. 75% of all comments HUD received on their rule-making regarding the SAFE Act dealt with the seller-financing issue.

Bryan Dunklin

LAW OFFICES OF BRYAN DUNKLIN
Attorney and Counselor at Law
2650 Cedar Springs Road #3343
Dallas, TX 75201
Office: 972.863.3348
Fax: 972.863.3349

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5 thoughts on “SAFE Act for Texas – Update”

  1. Does this SAFE proposal have any effect on private financing of deals? I couldn’t find anything about that in the bill.
    Richard Porter

  2. Hi Richard,
    Have you seen this?
    This will really cramp our style if it goes thru:

    Wall Street Reform and Consumer Protection Act
    Sections 1073 and 1074 of the Senate Version contain sections that will impose severe
    restrictions on “seller carry-back” financing of real property (commercial, residential and
    agricultural), i.e. such a seller will only be allowed to finance one property every 36
    months. Seller financing is a successful financial tool for small businesses and minorities
    alike.
    The unintended negative consequences of these 2 sections are enormous:
    1) Limits credit in urban and rural areas where institutional financing is scare.
    2) Many times, seller financing is the only alternative available on properties in need of
    rehabilitation and renovation. Banks and institutional lenders are wary of lending on
    such properties. With less properties being renovated, less jobs in the construction trades
    will be needed, leading to even more unemployment and blight.
    3) Many seniors contemplating retirement were counting on selling their rental properties
    and holding the mortgage (owner financing) and living on the monthly payments
    received. As bank accounts are paying 1-1.5%, the opportunity to earn 5-6% on Seller
    carry-back financing can be the difference between living their golden years
    independently or living in poverty.
    4) Real estate will soften even more as there will be less capital and / or credit available
    to keep the market moving. Property under $60,000 is not likely even to be considered by
    financial institutions for loans.
    5) Houses will become less affordable. Banks charge points, application fees; escrows,
    etc that often exceed $7-$10,000 or more in closing costs. Seller carry-back financing
    rarely involves points, application fees, etc.
    Currently there is a bill in the House Ways and Means Committee; HR 3440 “The
    Installment Sale Bill” that would have the opposite effect of the two sections described
    above than HR 4173. This bill would allow “dealers” to take installment sale tax
    treatment. It would have the effect of opening credit at no cost and expense to the US
    taxpayer, create jobs and increase revenues to the government. Rep. Bill Pascrell and
    Rep. Peter Roskam are the primary sponsors. Other sponsors include Rep. Adler and Rep.
    Andrews from NJ and Rep. Eric Cantor from VA.
    We would urge the members of the Conference to seek to have the provisions discussed
    above eliminated from the final draft. Allowing them to remain will cause financial
    problems our nation can ill afford and is contrary to public statements of opening the
    financial markets to the public and the importance of helping small businesses.
    Modifications supported by:
    National Association to Protect Private
    Property Rights
    Texas Land Developers Assoc.
    NJ Assoc. Real Estate Professionals
    Seller Financed Note Industry
    Real Estate Investor Organizations

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