Please explain the SAFE ACT!!!

[Jerry W.]

Hey all I am hoping to get some of the heavyweights to pitch in and help with information on the SAFE ACT.

I have been able to pick up some of it. It has very strict requirements that require every mortgage professional who works on a mortgage to register their loan officer number to that mortgage file.

What I do not understand are the hints I hear about possible limits on lengths of mortgages,amount of interest, the number of mortgages you do, and who is actually covered by this act.

Is this a national act that covers everyone the same or can states change it for their preferences?

Hopefully I can get someone like @Bill Gulley, or @Steven Hamilton II , to jump in and help on this.

[Bill Gulley]

Yes, it's comprehensive! It's consumer oriented, commercial loans are exempt. There is dry reading about two thirds through, it begins talking about originators and then contains the issues of seller financing and the standards of seller financed loans. There is specific reference to lease-options, land contracts or contract for deeds and then later defines any agreement taking a security interest in a covered property, those being 1-4 family dwellings. Vacant land is also included if a single family home may be built upon the land as well as any vacant lots intended for residential use. Mobile homes were included as a dwelling.

The Act is under the jurisdiction of HUD and each state may adopt their own version so long as any other version follows the spirit of the federal version. If there is any part found to be inconsistent, the federal law prevails. HUD is the final authority.

BTW, the CFPB is also jumping in working closely with other agencies. They too may take enforcement action.

Issues concerning loan terms have been strung out in the Act, limits balloon payments, 1/2 - 2/3s of the original amount needing to be paid down prior to any balloon, loans need to be fully amortized.

Prudent lending practices are expected, such is very vague for non-lenders, but they are following secondary market guidelines for the most part. Due diligence must be performed in order to assure a borrower will be able to qualify for any amount due at maturity, if any as well as for the payments as structured. Now, that can be an open door as there are compensating factors to underwriting.

The Act also covers servicing and requires a servicer to hold a license and is parallel to ALTA, HUD and other related regs. IMO, this is not an area for investors to get into at all without specific knowledge and sub-servicers are reasonable.

The education required appears to be similar in testing difficulty to an agent's license, not much and continuing education seems similar as well. They are to have basic origination experience prior, but that area is pretty limp. There is no way to learn seller financing from the aspect taken in my opinion as with seller financing you are looking into the future as to what needs to be accomplished to qualify rather than looking at qualifying issues as of today.

There are provisions for buyer/borrower consultation, this will be similar if not the same as the first time buyers programs with FHA or HUD grant programs. Non-profits are exempt from the regulations, specifically stating Habitat for Humanity or similar housing organizations.

There is an exemption for attorneys (of course, LOL) in the origination of such loans. There was a question about support and clerical or administrative office workers taking the application, no unless directly supervised, meaning you stand over them, so the attorney needs to take the application and interview them personally. The staff may process as in mailing out documents.

Originators need to be registered in the state of the secured property, if such is required by each state (they are to my knowledge).

Again, as to the Act, the good stuff for use is about 2/3s the way through, the rest is banking issues, servicing, and related professional aspects like appraisals, escrow and Realtors.

Now, Jerry, if you are interested in getting into notes or originations, be happy to talk to you. With your expertise you'd be up and running quickly, the hardest part for most are with the legal understandings required, the numbers are easy. This is a limited field with tons of opportunity for the right people.

That's a brief overview. :)