Are contract for deed transactions subject to licensure requirements? The Texas SAFE Act defines a Residential Mortgage Loan as a loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or on residential real estate.
Under Texas law, executory contracts for conveyance are more commonly referred to as contracts for deed or land. Property Code § 5.081 provides for a process by which the purchaser shall receive a deed conveying to the purchaser recorded, legal title to the property; and requiring the purchaser to execute a deed of trust. Given the possibility that the executory contract, can be converted to a deed and deed of trust at any time the purchaser complies with § 5.081(c), the Department considers transactions involving executory contracts to be subject to the same licensure requirements as seller financed transactions.
I am a licensed residential mortgage loan originator. I’d like to start originating mortgage loans for seller financers. What do I need to do to stay in compliance with the department? You should first discuss your plans to engage in originating seller financed transactions with the company that sponsors your residential mortgage loan originator license to determine if the company will allow you conduct this business. If so, the compliance requirements for loans you originate for seller financers will be substantially similar to other loans you originate under your license. The compliance requirements you will be subject to vary depending on whether your license is issued under the Mortgage Broker License Act or the Mortgage Banker Registration and Residential Mortgage Loan Originator License Act. While the following list is not intended to be an exhaustive list of your responsibilities as a loan originator, please consider the following:
Can you provide any guidance regarding the Texas SAFE Act exemption for licensed attorneys? The Texas SAFE Act provides an exemption for licensed attorneys under very narrowly defined circumstances. A licensed attorney may negotiate the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney’s representation of the client without being licensed as a residential mortgage loan originator. Some examples where the department may consider the loan negotiations as an ancillary matter include:
The exemption for attorneys does not apply in scenarios where the attorney both takes a residential mortgage loan application and offers or negotiates the terms of a residential mortgage loan. If an attorney takes an application and offers or negotiates terms, he/she must be licensed as a residential mortgage loan originator for even one transaction.