States are starting to crack down on seller financing

[Chris Seveney]

Sharing some info from two sources this week

Regarding states looking to strengthen seller financing licensing requirements and court decisions for those not licensed:

First from Facebook group school of sharks:

Hey guys,

TX Dept of Savings and Mortgage Lending has some new rules that are expected to go into effect January 01st, 2025. These are currently in the pre-comment stage with the deadline for pre-comment being 07/12/2024.

The biggest change will impact seller finance lenders who will be required to be licensed as a mortgage company once they exceed 3 loans in a consecutive 12 month period and will apply to all entities they use. This will potentially also impact any note buyers that plan to buy the notes.

This also applies to land sellers that have buyers who plan on building or placing a home on the property.

I urge everyone to review and get involved quickly as the timeline is very short to provide feedback.

I have attached the supporting documents for everyone's review.

Here's the link to the webinar and other docs.

https://www.sml.texas.gov/news/precomment-draft-and-stakeholders-webinar-notice-mortgage-regulation-rule-review/

The second is a Maryland case The Estate of H. Gregory Brown v. Carrie M. Ward, et al. which changes the licensing requirements for parties who are the assignee of a home equity line of credit ("HELOC").

Crux is the state is saying Mortgage Lender License Required for Installment Loans Where Installment Loan is Secured by Residential Property even if you did not originate the loan. If this is the case for heloc’s then it’s safe to say this could also be tested for first position liens.