Attorney & Safe Act

[Alex Hart]

Just got finished talking with my attorney about the whole Safe Act issue and mobile home dealers license for Ohio. According to him I will not be able to do Lonnie deals here in Ohio, unless I find some creative way to get around these issues. Below is the email he sent me discussing what he had found. I know it's long but thought you guys might want to read this.

Alex

I think you may have to comply with the Ohio version of the SAFE ACT, depending on the amount you are loaning. Here is what I found out: Ohio's SAFE Act enabling legislation, passed in July, 2009, made changes to both the Ohio Mortgage Broker Act ("OMBA") and the Ohio Mortgage Loan Act ("OMLA") to bring Ohio into compliance with the Title V of HERA is the Secure and Fair Enforcement for Mortgage Licensing Act ("SAFE Act"). The law is enforced by the Ohio Department of Commerce, Division of Financial Instituitions.

The Division of Financial Institutions (DFI) states the following:

If a manufactured or modular home dealer is acting as a mortgage broker (see ORC 1322.01(G)), the dealer would need an OMBA certificate of registration. However, if the dealer is providing the financing and not brokering the loan, then a certificate of registration under the OMLA is required (see ORC 1321.52). The SAFE Act defines a residential mortgage loan as "any loan primarily for personal, family or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling (as defined in section 103(v) of the Truth in Lending Act ("TILA")) or residential real estate upon which is constructed or intended to be constructed a dwelling (as so defined)". Because the TILA definition of dwelling is used and TILA defines dwelling to mean "a residential structure that contains one to four units, whether or not that structure is attached to real property", the SAFE Act requires that the individuals who originate these types of loans must be licensed.

According to DFI, you would not need to qualify under the mortgage broker act as you are not brokering a loan, but instead providing the financing yourself. The law carves out non-residential loans (the type you make, which is secured by personal property) that are less than $5,000.00. It also talks about a maximum rate of interest being 8%. It seems like as long as you make loans that are less than $5,000 and do not exceed 8% interest you will not have to register under OMLA with the DIF. If you are making loans in excess of $5,000, or potentially any loan over 8% in interest you will need to register. For sure if you are making loans over $5,000.

I also found out that as of 7/1/2010, the Ohio Manufactured Homes Commission will be responible for licensing all new and used broker/dealers in manufactured/mobile housing. In Ohio, anyone who sells even one used manufactured home needs a license. Title 45, Section 4517.02 states that a License is required to engage in motor vehicle or manufactured home business - remanufacturers. Section (A) states: "Except as otherwise provided in this section, no person shall do any of the following:
(7) Engage in the business of brokering manufactured homes unless that person is licensed as a manufactured home broker under sections 4517.01 to 4517.45 of the Revised Code."
Futhermore, the penalty is as follows:(F) Except as otherwise provided in this division, whoever violates this section is guilty of a minor misdemeanor and shall be subject to a mandatory fine of one hundred dollars. If the offender previously has been convicted of or pleaded guilty to a violation of this section, whoever violates this section is guilty of a misdemeanor of the first degree and shall be subject to a mandatory fine of one thousand dollars.

The part about selling 5 or less does not seem to apply to the selling of manufactured housing. The section of the law that applies to the 5 or less is section (6) which states: Make more than five casual sales of motor vehicles in a twelve-month period, commencing with the day of the month in which the first such sale is made, nor provide a location or space for the sale of motor vehicles at a flea market, without obtaining a license as a dealer under sections 4517.01 to 4517.45 of the Revised Code, provided that nothing in this section shall be construed to prohibit the disposition without a license of a motor vehicle originally acquired and held for purposes other than sale, rental, or lease to an employee, retiree, officer, or director of the person making the disposition, to a corporation affiliated with the person making the disposition, or to a person licensed under sections 4517.01 to 4517.45 of the Revised Code. :D :D :D

[Bill Gulley]

Realtyman, I have seen classes on line for less than $200, books about $80 and testing I think was $100. This will vary by state requirements to obtain a license. There will also be CE as with a real estate license.

My point above, which probably was not read, is that originators take on a liability to ensure that applicable laws were followed and that preditory lending aspects are not contained in the deals they originate. Which might be contained in Lonnie Deals as might be done by our OP.

Finding a mortgage originator, who has a background in the secondary market and very little knowledge of underwriting risks, to stick their neck out to approve and process, say, a wrap deal for a borrower with a credit score of 550 might be hard to do, if not impossible.

It's not about paying someone to do what you ask, as if ordering title work, it's about someone willing to do what you want in the deal and being liable for your scheme or strategy. It depends on what you do.

If you are going to sell MHs to people that can qualify for a mortgage, as most originators will use existing mortgage standards as a base line, how many of those people will be in the market for a used MH when they can qualify for something better, maybe a new MH.

If getting some guru contract approved were that simple, I'd say just pay someone to originate your deal, but to think that originators are going to bless any arrangement that comes to them is naive, IMO.

That means acting as a dealer and doing your own deals, structuring them as you like so long as they conform to requirements as YOU see compliance. If You can justify what you do, that's all that matters, so long as it's honest and until you find out differently.

I'm sure Josh would appreciate knowing that the time spent on BP is valued higher than $500.00 per hour! LOL Perhaps if one had a license not only could they do their own deals but they could be the "investor friendly" originator for other investors as well. They will probably be in short supply. So, say you only do one deal for someone a week (do that in your sleep or while eating lunch) at $500, that's 26K a year, that should cover the costs of classes and leaving plenty of time to do other things and be on internet sites.