Texas SAFE Act – Owner Financing

Owner Financing! Not any more!!

The Texas SAFE Act and Its Impact on Owner-Finance Sellers and Hard Money Lending, By Abid Hussain

In our real estate investor community, there has been much discussion and fear over the Texas version of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act). Although several resources and articles exist on the Internet (including the bill itself), the Lonergan Law Firm, P.L.L.C., feels that a simplified guide might be more useful to our clients. As a standard disclaimer, the following is not legal advice, and any publication of this document does not create an attorney/client relationship between the Lonergan Law Firm and the reader.

SAFE vs. T-SAFE
Before getting into the statute itself, let’s discuss the federal statute first. You may have heard that the Texas version of SAFE (T-SAFE), passed in 2009, is more restrictive than the version enacted by the federal government. This is true. T-SAFE can be more restrictive than SAFE because the federal government’s version establishes a minimum threshold of rights and protections. States may add more protections to their own specific versions of a federal law, but they may not go the other way and provide fewer rights or protections than the minimum threshold set by that federal law.

Now, let’s dive right into T-SAFE and see how it impacts you.

T-SAFE Summary
T-SAFE is encompassed in the Texas Finance Code, Chapter 180. The act establishes minimum requirements for obtaining a mortgage loan original license, the process for obtaining such a license, who must obtain a license, and penalties for originating loans without a license. The act specifically applies to residential mortgage loan originators.

Under the act, a residential mortgage loan originator (RMLO) is any individual who takes a mortgage loan application, or offers or negotiates the terms of a residential mortgage loan. There are several exceptions to the definition of an RMLO, but the two most relevant to our clients are:

  • People who perform only administrative or clerical tasks for a licensed RMLO.
  • A real estate broker or agent, unless he is compensated by a lender, mortgage broker, or other RSLO, or their agent.

A residential loan (RL) is a loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other security interest in a dwelling or residential real estate. This definition provides a very narrow exception to hard money lenders that we’ll cover below.

A dwelling has the same meaning as defined in the Truth in Lending Act, which is a residential structure or mobile home containing one to four family housing units, or individual units of condominiums or cooperatives. Residential real estate means real property located in Texas on which a dwelling is – or is intended to be – constructed.

There are only a few classes of people exempt from having to be licensed when originating a residential mortgage loan. They are:

  • A registered mortgage loan originator, meaning someone who is an RMLO and an employee of a depository institution, a subsidiary thereof that is regulated by a federal banking agency, or an institution regulated by the Farm Credit Administration.
  • An individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of the individual
  • A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney’s representation of the client, unless the attorney does both of the following two things: (a) The attorney takes a residential mortgage loan application, and (b) offers or negotiates the terms of a residential mortgage loan.
    An exclusive agent of a registered financial services company who is individually enrolled as a registered mortgage loan originator with the Nationwide Mortgage Licensing System and Registry.
  • Someone who offers or negotiates terms of a residential mortgage of his own homestead property.
  • A non-profit organization providing self-help housing that originates zero-interest residential mortgage loans for borrowers who provide sweat equity to construct the dwelling securing the loan.

Becoming licensed as a RMLO requires classroom work and passing an exam. The Texas Department of Savings and Mortgage Lending will also conduct a background check. The full details of how to become licensed are available on the agency’s Web site.

The penalties for originating a residential mortgage loan application without a license are severe. The agency is authorized to:

  • Deny, suspend, revoke, condition, or decline to renew a license.
  • Order restitution.
  • Impose an administrative fine up to $25,000.
  • Issue cease-and-desist orders, as well as immediate temporary orders if necessary.

The overall goal of T-SAFE is to ensure that each licensed RMLO is assigned a unique identification number, which appears on each residential mortgage loan that the RMLO originates. By doing so, T-SAFE hopes to track originated loans and install some accountability that was lacking in the recent housing and finance crisis.

Impact to Owner-Finance Deals
The impact of T-SAFE to owner-finance deals is significant. The definitions of residential loan, residential real estate, and RMLO are broad and extensive. We are hard-pressed to imagine a scenario where the seller in an owner-finance deal would not discuss the terms of the loan with the buyer. Therefore, T-SAFE makes it practically impossible for investors who routinely enter into owner-finance transactions to do so without being licensed.

The net impact of T-SAFE is that owner-finance sellers must fall into one of the exemptions if they want to avoid being licensed. Unless any such seller is originating a loan for an immediate family member (defined as a spouse, child, sibling, parent, grandparent, or grandchild) or owner-financing the sale of their own homestead property, the seller will have to outsource the loan application to a registered RMLO or use an attorney.

Complicating matters further, in the attorney exemption, the attorney can only originate the loan as an ancillary matter to the seller’s representation, and the attorney must not both take a residential loan application and offer or negotiate the terms of the residential mortgage loan. For example, if the attorney is drafting the loan package and the deed for the owner-finance seller as well as reviewing additional contracts and disclosures, and as a function of such a role also provides loan terms to the buyer, this is one of the few scenarios where T-SAFE is not violated.

Impact to Hard Money Lenders
Hard money lenders who only lend to investors enjoy a very narrow exception to T-SAFE. The legislation is designed to protect residential borrowers. However, many hard money lenders work exclusively with real estate investors who do not plan to live in the homes they purchase. In such scenarios, the SML Web site offers the following guidance:

Loans made to purchase and rehab properties with the intent to resell and loans to acquire rental properties are for business purposes, not personal, family, or household use, and are not subject to licensure under the Texas SAFE Act.

Note that if you are a hard money lender who originates even one loan to a residential buyer, then the exception quoted above does not exempt you from T-SAFE.

Here are 2 links that may be helpful.

http://www.ffiec.gov/safeact.htm

http://www.sml.state.tx.us/tdsml_important_information.html#safe_nmlsr

http://www.hud.gov/offices/hsg/ramh/safe/smlicact.cfm

AND if you wish to become registered, http://www.allianceacademy.org , they have great information including classes.

To register: Check out: http://mortgage.nationwidelicensingsystem.org/Pages/default.aspx

Seller Financing

Seller Financing

There is a lot of buzz about Seller Financing right now.  Some of the buzz is good, some bad and some ugly.

The Good

Seller Financing can help get deals done when traditional financing in not available.  It is a wonderful tool for Sellers to use.  It can even be combined with a §1031 Like-Kind Exchange so that the Seller can get the property sold AND still achieve a TOTAL deferral of gain recognition.  Not just the delay in payment under §453, but a total deferral allowed under §1031.

Click here and Ask Us How!

The Bad

The Housing and Economic Recovery Act of 2008 (HERA 2008) included the Secure and Fair Enforcement for Mortgage Licensing Act which also required each State to pass a similar law.  Most states have complied.

Texas, for example, passed House Bill 10, the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009.

This is not a treatise on the new law, but loosely if you are selling a property that has or could have a dwelling on it you MUST have a Mortgage Loan Originators License if you; 1. Take the application for a loan and/or 2. Negotiate the terms of a loan.

There are some extremely limited exceptions: You are otherwise licensed, you are selling to an immediate family member (as defined in the law) or you are selling your primary residence. (Commercial properties are not covered, but Sellers of agricultural properties may have some issues.)

The Ugly

The de minimis exceptions that existed in prior Texas law are NOT included in the Texas SAFE Mortgage & Licensing Act, so if you sell your rental house to your non-related tenant and you carry back a note, you MUST have a license if you take the application and/or negotiate the terms.  Both of those things you would most assuredly do under normal circumstances.

The Solution

You can get licensed or hire someone with the appropriate license to take the application and negotiate the terms.

Nothing in the new law interferes with the ability to achieve a complete tax deferral under §1031.


Click here
to download our Brief Exchange book.

Arizona–here we come

I got this email sent to me… This may be the most important email I have ever read! I think there is more truth than we realize here. So I had to post it here.  Hope it gets lots of reads.

EVERYBODY, HANG ON FOR DEAR LIFE…………………

We know Dick Lamm as the former Governor of Colorado .. In that context his thoughts are particularly poignant. Last week there was an immigration overpopulation conference in Washington , DC , filled to capacity by many of America ‘s finest minds and leaders. A brilliant college professor by the name of Victor Hansen Davis talked about his latest book, ‘Mexifornia,’ explaining how immigration – both legal and illegal was destroying the entire state of California . He said it would march across the country until it destroyed all vestiges of The American Dream.

Moments later, former Colorado Governor Richard D. Lamm stood up and gave a stunning speech on how to destroy America

The audience sat spellbound as he described eight methods for the destruction of the United States . He said, ‘If you believe that America is too smug, too self-satisfied, too rich, then let’s destroy America . It is not that hard to do. No nation in history has survived the ravages of time. Arnold Toynbee observed that all great civilizations rise and fall and that ‘An autopsy of history would show that all great nations commit suicide.”

‘Here is how they do it,’ Lamm said:

‘First, to destroy America , turn America into a bilingual or multi-lingual and bicultural country… History shows that no nation can survive the tension, conflict, and antagonism
of two or more competing languages and cultures. It is a blessing for an individual to be bilingual; however, it is a curse for a society to be bilingual. The historical scholar, Seymour Lipset, put it this way: ‘The histories of bilingual and bicultural societies that do not assimilate are histories of turmoil, tension, and tragedy.’ Canada , Belgium , Malaysia, and Lebanon all face crises of national existence
in which minorities press for autonomy , if not independence. Pakistan and Cyprus have divided. Nigeria suppressed an ethnic rebellion. France faces difficulties with Basques, Bretons, Corsicans and Muslims.’

Lamm went on:

‘Second, to destroy America , invent ‘multiculturalism’ and encourage immigrants to maintain their culture. Make it an article of belief that all cultures are equal; that there are no cultural differences. Make it an article of faith that the Black and Hispanic dropout rates are due solely to prejudice and discriminationby the majority. Every other explanation is out of bounds.

‘Third, we could make the United States an ‘Hispanic Quebec ‘ without much effort. The key is to celebrate diversity rather than unity. As Benjamin Schwarz said in the Atlantic Monthly recently: ‘The apparent success of our
own multi-ethnic and multicultural experiment might have been achieved not by tolerance but by hegemony. Without the dominance that once dictated ethnocentricy and what it meant to be an American, we are left with only tolerance and pluralism to hold us together.’ Lamm said, ‘I would encourage all immigrants to keep their own language and
culture. I would replace the melting pot metaphor with the salad bowl metaphor. It is important to ensure that we have various cultural subgroups living in America enforcing their differences rather than as Americans, emphasizing their similarities.’

‘Fourth, I would make our fastest growing demographic group the least educated. I would add a second underclass, unassimilated, undereducated, and antagonistic to our population. I would have this second underclass have a 50% dropout rate from high school.’

‘My fifth point for destroying America would be to get big foundations and business to give these efforts lots of money. I would invest in ethnic identity, and I would establish the cult of ‘Victimology…’ I would get all minorities to think that their lack of success was the fault of the majority. I would start a grievance industry blaming all minority failure on the majority plation.’

‘My sixth plan for America ‘s downfall would include dual citizenship, and promote divided loyalties. I would celebrate diversity over unity. I would stress differences rather than similarities. Diverse people worldwide are mostly engaged in hating each other – that is, when they are not killing each other. A diverse, peaceful, or stable society is against most historical precept. People undervalue the unity it takes to keep a nation together. Look at the ancient Greeks. The Greeks believed that they belonged to the same race; they possessed a common language and literature; and they worshipped the same gods. All Greece took part in the Olympic games.. A common enemy, Persia , threatened their liberty. Yet all these bonds were not strong enough to overcome two factors: local patriotism and geographical conditions that nurtured political divisions. Greece fell. ‘E. Pluribus Unum’ — From many, one. In that historical reality, if we put the emphasis on the ‘pluribus’ instead of the ‘Unum,’ we will ‘Balkanize’ America as surely as Kosovo.’

‘Next to last, I would place all subjects off limits. Make it taboo to talk about anything against the cult of ‘diversity.’ I would find a word similar to ‘heretic’ in the 16th century – that stopped discussion and paralyzed thinking. Words like ‘racist’ or ‘xenophobe’ halt discussion and debate. Having made America a bilingual/bicultural country, having established multi-cultum, having the large foundations fund the doctrine of ‘Victimology,’ I would next make it impossible to enforce our immigration laws. I would develop a mantra: That because immigration has been good for America , it must always be good. I would make every individual immigrant symmetric and ignore the cumulative impact of millions of them.’

In the last minute of his speech, Governor Lamm wiped his brow. Profound silence followed. Finally he said, ‘Lastly, I would censor Victor Hanson Davis’s book ‘Mexifornia.’ His book is dangerous. It exposes the plan to destroy America .. If you feel America deserves to be destroyed, don’t read that book.’

There was no applause. A chilling fear quietly rose like an ominous cloud above every attendee at the conference. Every American in that room knew that everything Lamm enumerated was proceeding methodically, quietly, darkly, yet pervasively across the United States today. Discussion is being suppressed. Over 100 languages are ripping the foundation of our educational system and national cohesiveness. Even barbaric cultures that practice female genital mutilation are growing as we celebrate ‘diversity.’ American jobs are vanishing into the Third World as corporations create a Third World in America Take note of California and other states. To date, ten million illegal aliens and growing fast. It is reminiscent of George Orwell’s book ‘1984.’ In that story, three slogans are engraved in the Ministry of Truth building: ‘War is peace,’ ‘Freedom is slavery,’ and ‘Ignorance is strength.’

Governor Lamm walked back to his seat. It dawned on everyone at the conference that our nation and the future of this great democracy is deeply in trouble and worsening fast. If we don’t get this immigration monster stopped within three years, it will rage like a California wildfire and destroy everything in its path, especially The American Dream.

If you care for and love our country as I do, take the time to pass this on just as I did for you.

NOTHING is going to happen if you don’t!
email send by Philip Don Gates

+++++++
I lived in Canada most of My adult life and the challenges that go between the “english speaking” and the “french speaking” sides is crazy. Many people in Quebec don’t speak nor will speak English. All of the signs are in French, including those that are designed for the people that don’t live there.

When Quebec was going to separate and they voted 49.5% in favor, I would of rallied the people to make it 51% so that Canada would not continue this burden of stupid, ignorant and demanding “bilingual (FRENCH)” issue. Bilingual is 2 languages and I think that to speak multiple languages is absolutely fantastic. I think we should all know at least 2 languages. It makes all of us more understanding of others, but that does not mean that it has to be rammed and bullied onto you. This should be choice.

IF all people went to another country that they did not understand their culture, and language and were forced to be there for 1 month, I think the whole world would be a better place. The grass is NOT greener on the other side, it is different and we should make a choice of where we want to live because of what the area has to offer, not make the place we live where we came from. Why would I move from one place I did not like to another place just to bring my baggage with me..

Love where you live, or go where that place is.
By Andrea
++++

YouCut

Introducing ‘YouCut’

YouCut – a first-of-its-kind project – is designed to defeat the permissive culture of runaway spending in Congress. It allows you to vote, both online and on your cell phone, on spending cuts that you want to see the House enact. Vote on this page today for your priorities and together we can begin to change Washington’s culture of spending into a culture of savings.  You can do this on your phone or on the internet!

Wait for the video!

Here is the website that you need to participate in!

Economic Data: Week May 10, 2010


It’s all Greek to me!  That’s what investors first thought last week when the DOW plunged almost 1000 points and then regained traction.  What happens overseas, has its effects here  in the U.S.  The European financials are beginning  to shake in their own boots regarding current economic  conditions as concerns remain for Portugal, Spain, and Italy.  Now they are in the works with a Trillion dollar  bail-out for the Europen markets.  However, now we are being told the ‘1000’ point drop  was a kind of computer glitch or some sort of automated trading scenario that caused all the turmoil.  Already,  our  government is looking into regulatory actions and how this  problem could have been avoided.  The Senate is taking financial reform to the next level too this week even as Goldman Sachs seeks to improve its own reputation with a huge P.R. campaign.

Better news results on the job front.  Over 290,000 jobs were added last month.  Compared to last year at this time close to 500,000 jobs were lost.  The Labor Department report stated that jobs grew in many sectors, from manufacturing to professional services.  April saw the biggest jobs gain within the last four years.  The positive jobs report came as a relief on top of the fact that U.S. companies are reaching a point that they can’t squeeze any more work out of leaner staffs. Which is why one local headline read, “More hiring may be around the corner.”  Proof once again that our economy is turning the corner slowly but, surely.

A strong showing in March created a statewide first-quarter jump in homes sales of  4.7% compared to the same quarter last year.  Of course, the first-time homebuyers tax credit is being attributed for the gains.  San Antonio had a 12.5% jump in sales.  Even though the tax credits have stopped for most home buyers, keep it mind that Military and certain other federal employees working outside the U.S.  have an extra year to obtain a primary residence in the U.S. and qualify for the tax credits.  San Antonio is a Military city!  With no more tax credits available, maybe some cities should do what Seguin, Texas is doing.  Their City Council approved incentives to multi-family developers, home builders, and home buyers with incentives ranging from $2000-$5000 to make it easier for people working in the city to settle there. 4,000 workers are expected to  be employed at the new Catipillar plant in Seguin.  Boerne, Texas  seems to be doing what they can to better their  own economy.  The Kendall County Economic Development Corp put together a deal to offer tax incentives to Texas Star Food and Nut Company to expand their own local operations.  By doing that, the company expects to add 60 jobs over the next five years.

According to Bankrate.com, mortgage rates dipped last week  as an indirect result of the debt crisis in Greece.  The current index was at 5.12% compared  to last year at the same time of 5.27%.  The question is when to lock-rate?  All I can tell you to do is watch the markets.  As a rule-of-thumb, when the DOW does bad, that is sometimes an indicator that investors  are seeking the safe haven of U.S. Treasuries and mortgage-backed securities and vice versa.  That’s what happened last week.  To head off any volatility in the market place, the time to lock is now.  If you are still looking for the right time to buy, now is it. Low mortgage rates persist, Lenders are loaning money, and home prices couldn’t be better in my opinion. Find a local Realtor and make that decision to buy now!

Quote of the week!
When we do more than we are paid to do,
eventually we will be paid more for what we do.
——Zig Ziglar

Stupid Joke of the week!
Why couldn’t the butterfly go to the dance?
It was a Moth Ball!

(These article is for informational purposes only. Do not use it as financial advice.  For questions/comments, please contact Tony Stevenson, Loan Office at 210.846.4666 or email at tstevenson@swbc.com.)

Sincerely,

Tony Stevenson

Apathetic-USA.com

I found a great website!!!   http://apathetic-usa.com/

….

1 . To awaken the American public to THE THREAT of Radical Islam, its purpose and its goals. If you are of the opinion that Islam is a peaceful religion, you have not read the Qu’ran as it plainly states to kill the infidel if he does not submit or convert. I refer you to the web site Prophet of Doom, which addresses Muhammad’s own words. He states, in so many words, that if you are Muslim and you are peace-loving and seek peaceful coexistence with Christians and Jews, you are a traitor and a hypocrite. Muslims may appear peaceful in a public forum, but they speak a different language and show a complete different face when inside their mosque retreats.

2. To address the IMMIGRATION CRISIS we are experiencing in this country. If we do not set limits on who can enter, control our existing borders, and start enforcing our current immigration laws, this country is going to start experiencing the same problems Europe is facing today. If you doubt this, please do some research on what is happening today in Germany, France, and has already happened in Spain. If the immigration chart/graph in the immigration section does not alarm you, you either have your head buried in the sand or you did not do well in high school math and do not understand graphs.

3. To address the concept of THE FOUR INSTRUMENTS OF NATIONAL POWER and how terrorism is using these instruments to create havoc within our society, and to attain their ultimate goal of destroying America. This concept was an assimilation of ideas and concepts learned by S. R. Gable, Col USAF, Ret during his war College years. This is presented in the flash movie “America Wake Up.

I AM PROUD TO BE A WHITE AMERICAN!

I was born in Austria and Europe in whole has gone to xxxxx in a hand basket.  The native Austrians are being out numbered by illegal immigrants and all want, but don’t give back.  As soon as I was allowed, I changed my citizenship to “American”  NOT Austrian America, JUST PLAIN American.  AND I AM VERY PROUD of it.  This is one of the greatest nations in the world and I have the privilege to live here. So  I will do what I need to keep it the best.  Below is what someone sent to me and I could of not worded it better.

This is great. I have been wondering about why Whites are racists, and no other race is…..

Proud to be White


Michael Richards makes his point……………

Michael Richards better known as Kramer from TVs Seinfeld does make a good point..

This was his defense speech in court after making racial comments in his comedy act.  He makes some very interesting points..


Someone finally said it.  How many are actually paying attention to this?  There are African Americans, Mexican Americans, Asian Americans, Arab Americans, etc.

And then there are just Americans.  You pass me on the street and sneer in my direction.  You call me ‘White boy,’ ‘Cracker,’ ‘Honkey,’ ‘Whitey,’ ‘Caveman’… and that’s OK.

But when I call you, Nigger, Towel head, Sand-nigger, Camel Jockey, Beaner, Gook, or Chink .. You call me a racist.


You say that whites commit a lot of violence against you… so why are the ghettos the most dangerous places to live?


You have the United Negro College Fund. You have Martin Luther King Day.


You have Black History Month.  You have Cesar Chavez Day.


You have You have Ma’uled Al-Nabi.


You have the NAACP.  You have BET… If we had WET (White Entertainment Television), we’d be racists.  If we had a White Pride Day, you would call us racists.


If we had White History Month, we’d be racists..


If we had any organization for only whites to ‘advance’ OUR lives, we’d be racists.


We have a Hispanic Chamber of Commerce, a Black Chamber of Commerce, and then we just have the plain Chamber of Commerce.  Wonder who pays for that??


A white woman could not be in the Miss Black American pageant, but any color can be in the Miss America pageant.

If we had a college fund that only gave white students scholarships… You know we’d be racists.

There are over 60 openly proclaimed Black Colleges in the US .  Yet if there were ‘White colleges’, that would be a racist college.


In the Million Man March, you believed that you were marching for your race and rights..  If we marched for our race and rights, you would call us racists.


You are proud to be black, brown, yellow and orange, and you’re not afraid to announce it.  But when we announce our white pride, you call us racists.


You rob us, carjack us, and shoot at us. But, when a white police officer shoots a black gang member or beats up a black drug dealer running from the law and posing a threat to society, you call him a racist.

I am proud… But you call me a racist.

Why is it that only whites can be racists??

There is nothing improper about this e-mail..  Let’s see which of you are proud enough to send it on.  I sadly don’t think many will.  That’s why we have LOST most of OUR RIGHTS in this country.  We won’t stand up for ourselves!

BE PROUD TO BE WHITE! It’s not a crime YETbut getting very close!

Copy and paste this to your friends and lets all of us become “just one nation – American”

I am not sorry to be proud of who I am.  and if you are offended, well then you need re-evaluate of who you are and then go back to where that is, if you want to be in America, then become one!.

Texas Ranch and Land meeting:

Texas Ranch and Land meeting: April 28, 2010

Texas is the 5th largest economy in world!  So what we do matters.   Currently we have around $7 billion in the rainy day fund, but because of the federal unfunded mandate of the new health care bill, we will have a 20 billion in debt Texas in the 1st year!

http://sunshinereview.org/index.php/Texas_state_budget

The reason is that 25% uninsured 2-4 billion cost for Texas.

Texas Unemployment 8.2% vs  10-20% or higher in other states . Illinois desperate, Navada, Florida, California are the worst off.

It will cost $4-$5 billion if the Cap Trade come into effect!

Not since great depreciation has the gov run private business out of business and not allowed  private industry take up the slack.

Tennessee valley authority took over the electricity business away in last depression by undercutting the private industry!

Texas Ground Water rights

Federal clean water act is working on removing the word “navigable” .  This is a bigger problem than at first glance. That would mean all water including your swimming pool.

Here is the current law suite information take a look! Don’t be left out in the dark of what is going on.  These are our rights that they are working on taking away.

http://stmarytxlaw.mediasite.com/mediasite/Catalog/pages/catalog.aspx?catalogId=c7b36466-40e3-4d88-b90c-0761e609344e