Mortgage Loan Originator for Owner Financing

[Lori S.]

Hi,

Thanks to the Dodd Frank Law my real estate investment strategy has really changed over the past year.

I've moved away from seller financing but have been thinking about partnering with an individual mortgage loan originator so that I can again seller finance my properties. The originator can facilitate the seller financing process for a fee and I will be compliant with the law.

My strategy is to purchase C class homes for cash and offer seller financing over a ten year period.

Anyone else doing this or have worked with a MLO in this capacity? If so, I would love to hear more about it.

Yes, I know that I can OF to other investors and will do it if the deal is right, but I also want the ability to OF homes to end buyers without having to become a MLO myself.

I would love to hear your thougths.

[Dion DePaoli]

If you, the person who extends credit by cash or by equity, do more than allowed in the state, then you are acting as a lender and will need a license.  Holding yourself out to the public to provide financing is a licensed activity.  

Most MLO's simply do not have enough experience to really know all the in's and out's of the law.  The newer the license, the less the likelihood.  There is still a ton of side line chatter all containing misconceptions of the rules as well.  

In Tennessee, it's not clear what state you plan to operate, there is zero exemption from license to provide Seller Financing.  ANY Seller who plans to provide a residential mortgage loans to a person or family for household or personal falls under license.  In addition, the state license law requires MLO's to work for a licensed Mortgage Lender or Mortgage Broker, meaning the person with a license is not enough, said person must be employed or sponsored under a business which is also duly licensed.  The MLO can not operate independently.  I tend to get a sense there are rogue MLO's running around trying to find contract work.

A MLO in any state is not authorized to practice law and can not create or prepare loan documents without a state bar license.  The same laws also prevent title companies or agents from doing the same.  The documents need to be prepared by an attorney who is state licensed.