I think you’re worrying too much; I see this so-called “SAFE Act” as much like the often-dreaded due-on-sale-clause. Many investors worry about it, when it reality many lenders don’t enforce it, for a variety of reasons. Also, keep in mind that escrow agents and title companies are supposed to be neutral third parties. They generally don’t ask questions to make sure everything is “legal” and on the up and up, but that’s not to say they’re going to ignore something that’s clearly fraudulent or blatantly illegal. I’ve never heard of an escrow agent asking a real estate or mortgage broker if his license is active, for example. If a seller chooses to “originate” a seller-financed mortgage without having a “required license (good grief!),” I would think the onus is on the seller, not the closing agent. You can either cow down to a silly regulation and do as they say, or you can be strong and say “get out of my way and don’t tell me what I have to do.” A willing buyer and seller with reasonable intelligence and honorable intentions should be able to complete a transaction without “big brother” butting in.
Seller financing in CA/Safe Act - Posted by Kristine-CA
Posted by Kristine-CA on May 28, 2010 at 19:45:36:
Greetings. After reading the thread below, I read the bill CA passed in
response to the requirements of the federal Safe Act. After reading pages
and pages of requirements and confusing info and all the FAQs on the CA
DRE website, it appears that I must become licensed to sell with owner
financing, unless I’m selling my personal residence, or negotiating on behalf
of family.
Becoming licensed is something like 20 hrs of specified classes and a credit
check, etc. Not great but not impossible. But I’m going to need something
sooner than that.
From my reading, it’s possible to use someone who is already a licensed
originator to “negotiate” and takes the application of the borrower. Does
anyone know how that would work? I have a buyer, I own a property that I
want to sell via seller financing. Do I hire the mortgage broker to “negotiate”
for me? Can I talk about the loan at all with the buyer?
How come so many MLS listings for investment properties say seller will
carry? Are they using a broker to comply with this law?
If someone can point me towards a clearer understanding, I’d be grateful!
Kristine
Re: Seller financing in CA/Safe Act - Posted by michaela-CA
Posted by michaela-CA on May 29, 2010 at 20:48:46:
I haven’t read it, so this just comes off the top of my head: can you create a Corp./LLC and transfer the ownership to that entity and then create an installment sale of that company?
If a property owner must become a licensed loan originator to offer a seller carry back, will we now be eligible for the TARP bailout should the mortgage fail?
My understanding is that CA DRE brokers have until 12/31/2010 to get the MLO (Mortgage Loan Originator) endorsement, so it?s business as usual until then.
I don?t think most real estate agents will get the MLO endorsement, therefore won?t be able to arrange seller financing even if they are the selling/listing broker. To get the endorsement you have to pass two tests, complete 20 hours training, pass a background check and pass a credit check. There might even be a yearly renewal requirement, I can?t remember now. The test isn?t easy from what I hear. Doubtful your average real estate will want the hassle.
To arrange your seller financing you might try to find a licensed MLO to broker the loan, similar to how mortgage brokers broker loans between lenders and borrowers now. They will probably want points and fees paid either by you or the borrower, same as they are getting now. Haven?t thought or heard much about this angle. Seems like it might get expensive.
This is all a knee jerk reaction to the subprime mortgage meltdown. Don?t you just love it when the federal government ?protects? us.
Posted by Rick Harmon on May 28, 2010 at 23:18:10:
Hi Kristine - Presume you got my message while driving thru your hometown last week.
If a property is listed on an MLS, I’ll assume that at least one or more brokers will bill involved in ant potential sale, so licensing shouldn’t be an issue.
As for OWC, I’m not aware of any commercial lenders that will lend at the higher LTV’s that buyers may want (>70% +) so under normal economic times sellers try to get their equity out any way they can.
Given the current economy and the likely future of commercial lending looking bleaker, not rosier, for the next few years at least, seller financing is more likely to become the norm (again).
Granted if you have listed a property with a broker who uses the MLS, then your licensing issue should be taken care of. However, what about when you use a flat rate listing broker. Is that service included?
Also, given that some folks don’t want to pay broker commissions, does this mean that a new cottage industry will develop whereby some sellers contract to pay brokers to merely negotiate/document seller financing?
Sounds to me like this will cause more problems rather than less, but hey, whatdoIknow?
What about escrow and title? - Posted by Kristine-CA
Posted by Kristine-CA on May 30, 2010 at 21:43:57:
Not so worried about buyers being unhappy, or having them report
taking a loan with a non-licensed mortgage originator. However, what
about escrow officers and title companies that won’t work with
contracts that include language about selling on terms or ones that
won’t prepare the note and deed of trust. Surely their legal
departments will steer clear of anything that involves them working
with mortgage originators who are unlicensed.
The last loan I originated, per the definition of HUD, was about 10
months ago. I’m really trying to find out the real story and
requirements now. I have NO interest in becoming a
registered/licensed originator. That would put me in a position of
having to serve my borrowing customers per state and federal laws, no
problem there. However, these same customers would also be my
buyers. I see that as a conflict of interest.