States are starting to crack down on seller financing

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States are starting to crack down on seller financing

Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

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.

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Nathan GesnerBusiness Member
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
2y

Yeh, that's only going to affect the big boys. The average seller-finance loan is through a mom-and-pop that does 1-2 in their life.

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  • Nathan GesnerBusiness Member
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    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    2y

    Yeh, that's only going to affect the big boys. The average seller-finance loan is through a mom-and-pop that does 1-2 in their life.

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  • Andrew FreedBusiness Member
    Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
    2y

    @Chris Seveney - Interesting find, thanks for sharing. Do you think this may have implications in the "sub to" community? Or would this exclude "Sub to" since it is a different mechanism. Just curious because people in that community could exceed the yearly limit pretty easily. 

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  • Chris SeveneyBusiness Member
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    OP
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y
    Quote from @Andrew Freed:

    @Chris Seveney - Interesting find, thanks for sharing. Do you think this may have implications in the "sub to" community? Or would this exclude "Sub to" since it is a different mechanism. Just curious because people in that community could exceed the yearly limit pretty easily. 


     For those that wrap a mortgage around a sub-to this will definitely come into play. It took close to 15+ years, but states are finally catching on that the majority of loans are no longer held by banks and by non-bank lenders who are selling them off to private equity and other non-bank funds including individuals and they are starting to hear about the shady stuff going around.

    Regarding straight sub-to and banks calling loans etc., this I think is longer term implosions as I am seeing people who absolutely should not be buying a home as they have no money buy them sub-to because of little down payment and will eventually lose the property and that is when many whose mortgages are still on the property come out and sue. That time will be coming but it is not imminent yet... 

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  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y

    The mortgage & re industry does not want to see seller finances and the banks don't want to see their loans that they underwrote transferred. Why would any of them?

    You need a deal before the deal, play it safe and don't have to worry about that.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2y
    Quote from @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.


    So what your saying is if you buy paper in MD on resi property you also need to be a MLO which of course also means NMLS registered.. ?  I have MLO and am registered but Not currently active but I keep up on CE each year so I can activate if I need to.. the main issue for me as an independent is the NMLS mortgage call report is so darn time consuming and intrusive..
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  • Chris SeveneyBusiness Member
    Moderator
    OP
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y
    Quote from @Jay Hinrichs:
    Quote from @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.


    So what your saying is if you buy paper in MD on resi property you also need to be a MLO which of course also means NMLS registered.. ?  I have MLO and am registered but Not currently active but I keep up on CE each year so I can activate if I need to.. the main issue for me as an independent is the NMLS mortgage call report is so darn time consuming and intrusive..

     Basically that is where it is headed. Ohio for debt buyers needs a MLO. I have the MLO and continue the CE but as you mention, the call reports etc, are very painful. I am going to see if there are consulting firms etc. that do that for you. I know some software will do it for you but that is for more traditional lenders.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2y
    Quote from @Chris Seveney:
    Quote from @Jay Hinrichs:
    Quote from @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.


    So what your saying is if you buy paper in MD on resi property you also need to be a MLO which of course also means NMLS registered.. ?  I have MLO and am registered but Not currently active but I keep up on CE each year so I can activate if I need to.. the main issue for me as an independent is the NMLS mortgage call report is so darn time consuming and intrusive..

     Basically that is where it is headed. Ohio for debt buyers needs a MLO. I have the MLO and continue the CE but as you mention, the call reports etc, are very painful. I am going to see if there are consulting firms etc. that do that for you. I know some software will do it for you but that is for more traditional lenders.


     ya the big lenders have a dedicated staff person for it..  Having done it myself total pain that whole NMLS website is so tough for me to use.. I burned up the help line.. :)  

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