Safe Act Problems & Solutions
Regarding the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, or SAFE Act
Most of this applies whenever taking a “residential loan application” from a buyer
NOTE: All my conclusions or assessments should not be considered any legal advice!
A seller taking back a mortgage (owner financing) must have a mortgage originator license unless:
- It’s their primary residence, or
- They are selling to a direct family relative, or
- It is not a ”Residential mortgage loan”
According to the Safe Act the term “residential mortgage loan” means any loan primarily for personal, family, or household use.
A seller financing a property that is NOT their primary residence (i.e. rental, second home, residential lot) must have a license unless:
- It is sold to an investor so that the loan is not for personal, family, or household use
My conclusions on buying with seller financing and private money (The Ultimate Strategy):
- Any seller can finance us as real estate investors because their loan to us is not a ”residential mortgage loan”
- Any private investor or private lender can fund our purchases because their loan to us is not a ”residential mortgage loan”
A real estate investor taking back a mortgage (owner financing) must have a mortgage originator license unless:
- It is sold to another investor so that the loan is not for personal, family, or household use
My conclusions on selling with seller financing:
- You must be licensed to ‘seller finance’ your investment property to owner occupants, or
- Application from your buyer must be taken by a licensed residential mortgage loan originator (RMLO)
Solutions for selling with owner financing
- Sell to a tenant buyer
- Use a contract for deed or installment land contract. Legal title does not transfer
- Hold property in a land trust. Sell the beneficial interest in the trust which is consider personal property
- Hold the property in an LLC and sell the LLC
- Use a licensed residential mortgage loan originator
- Get licensed (YIKES)
