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Texas Department of Savings and Mortgage Lending

Frequently Asked Questions (FAQ): Government Subdivisions and 501(c)(3) Non-Profit Organizations

What is the 'SAFE Act' and how does it apply to our non-profit?

For general descriptions about the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, also called the 'SAFE Act,' the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009 also called the 'Texas SAFE Act,' NMLS, and General Licensing Questions, please refer to the Frequently Asked Questions web page at: https://www.sml.texas.gov/tdsml_faq.html.

What type of license do I need if my company is a non-profit organization or political subdivision?

There are six Company License types as regulated by the Department of Savings and Mortgage Lending. For the State Licensing Requirements and to determine what best fits your business, please refer to: https://mortgage.nationwidelicensingsystem.org/slr/Pages/DynamicLicensing.aspx?StateID=TXSML.

What is the Texas SML Auxiliary Mortgage Loan Activity Company License?

The Auxiliary Mortgage Loan Activity Company License is designed specifically for political subdivisions and 501(c)(3) non-profit organizations engaged in residential mortgage loan origination activities, including down payment assistance, and owner occupied rehabilitation programs funded through HUD, the Texas Department of Housing and Community Affairs, or other housing finance agencies and foundations. For a description of the Auxiliary Residential Mortgage Loan Originator license and who it applies to, please refer to: https://mortgage.nationwidelicensingsystem.org/slr/PublishedStateDocuments/TX-SML-Auxiliary-Company-New-App-Checklist.pdf.

We are a non-profit organization and we build affordable homes for first time home buyers, we do not do the mortgage loans, we provide forgivable grants as down payment assistance and for closing costs. Why do I have to get licensed?

If your activity meets the provided definition below, you are originating mortgage loans in Texas, just by another name. For the purposes of the SAFE Mortgage Licensing Act, and the State of Texas SAFE Mortgage Licensing Act, the definition of a mortgage loan is found in the Texas S.A.F.E. Act, Texas Finance Code, Chapter 180, Section 180.002 defines:

(18) “Residential mortgage loan” means 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.”

Additionally, according to language in the State Community Development Block Grant Program Appendix H regarding securitization of CDBG funded loans, and HOME Program Rules:

§92.504 Participating Jurisdiction Responsibilities; Written Agreements; On-site Inspection

§92.504(c)(1)(x) Enforcement of the agreement: The means of enforcement may include liens on real property, deed restrictions, or covenants running with the land. The affordability requirements in §92.252 must be enforced by deed restriction. In addition, the agreement must specify remedies for breach of the HOME requirements. The agreement must specify that, in accordance with 24 CFR 85.43, suspension or termination may occur if the State recipient materially fails to comply with any term of the agreement. The State may permit the agreement to be terminated for convenience in accordance with 24 CFR 85.44.

Your program activity probably does generate an instrument establishing the required security that meets the residential mortgage loan definition, and thus, you are probably originating a subordinate residential mortgage loan that is being called a grant within the CDC industry.

We are a non-profit organization and we do not receive compensation for originating our down payment assistance forgivable grants to our low income clients. Do we still have to be licensed since we don’t meet the definition of a residential mortgage loan originator?

A residential mortgage loan originator, as described by Texas Finance Code, Chapter 180, Section 180.002(19)(A) is ‘an individual who for compensation or gain or in the expectation of compensation or gain...’ This section means either commission, expectation of commission, or salary. Even though you are a non-profit, if you pay your employees to actively originate residential mortgage notes for your assistance program, they do meet the definition of a ‘Residential Mortgage Loan Originator’ under the SAFE Act.

Our attorney has advised us that a Texas 501(c)(3) Non-Profit Corporation is exempt from licensing according to The Texas Administrative Code, Title 7, Part 4, Chapter 80, Subchapter A, Rule §80.1(6)(A)(v), but we are also hearing that we are required to be licensed. Where can I find that information?

Please note that Subchapter A is rescinded as of January 1, 2011 and replaced with Subchapter L of Chapter 80. Subchapter L governs the licensing, registration and conduct of Residential Mortgage Loan Originators, Mortgage Companies, Financial Services Companies, Credit Union Subsidiary Organizations, Auxiliary Mortgage Loan Activity Companies, and Independent Contractor Loan Processors and Underwriters under the Act and Finance Code Chapter 180, the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009 ("SAFE Act"), except for individuals engaged in authorized activity subject to the authority of a regulatory official under Finance Code §180.251(c).

Our city is planning to hire a consulting firm to originate for our HOME, CDBG and NSP Programs. Does the consultant need an Auxiliary RMLO license? Do we?

If your program activity requires a licensed residential mortgage loan originator, then the contractor is required to perform and be responsible for all origination activities and to have the license that best fits their business activities, not your Auxiliary activities. There are six company (MU1) license types, three branch (MU3) license types, and six individual (MU4) license types available to select from. Carefully review the descriptions and requirements for each type before a selection is made on the NMLS. Information is available on the NMLS Resource Center website at: https://mortgage.nationwidelicensingsystem.org/slr/Pages/DynamicLicenses.aspx?StateID=TXSML.

If the city hires a licensed residential mortgage loan originator as described above, the city is NOT required to obtain the Auxiliary License as long as nobody from the city will have contact with the served population with respect to the program loans.

I received an e-mail showing my License status as Approved - Deficient. What does this mean?

This License Status is designed to notify our department of any pending issues. Some of the pending issues do not preclude you from originating in Texas. While your status may reflect ‘Approved – Deficient’ a customer will only see you as ‘Approved’ on the NMLS Consumer Access website. This allows both the originator and SML to work on relatively minor issues towards a clear ‘Approved’ status without impacting your ability to originate. For the Status List and what they mean, see the NMLS website at: https://mortgage.nationwidelicensingsystem.org/consumer/resources/NMLS Document Library/License Status Chart.pdf.

How can I check if a person is approved to originate in Texas?

To check if a person is legally originating, you can visit the NMLS Consumer Access website at: https://www.nmlsconsumeraccess.org.

How much will it cost us to get the Auxiliary License?

The fee schedule for Texas can be found at: https://www.sml.texas.gov/ResidentialMortgageLoanOriginator/rmlo_mb_forms.html.

How did Habitat for Humanity get its exemption?

The ‘Habitat Exemption’ comes from the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009 Sec. 180.003 which provides for the following EXEMPTION: (6) a nonprofit organization providing self-help housing that originates zero interest residential mortgage loans for borrowers who have provided part of the labor to construct the dwelling securing the loan. This exemption applies to the majority of Habitat for Humanities and Texas Bootstrap Programs, and is provided for within the Act. Any variance from the described activity could trigger the compliance requirements of the Texas SAFE Act, even for the Habitat for Humanity programs. To request a staff review of your program and a letter reflecting the determination of your requirements under the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009, please submit a letter describing your program and requesting an exemption in writing on company letterhead to:

Department of Savings and Mortgage Lending
2601 N. Lamar, Suite 201 Austin, TX 78705

What can I do to get an exemption?

The Texas SAFE Licensing Act and the federal SAFE Licensing Act do not give the Department of Savings and Mortgage Lending any room for ‘exempting’ anyone from licensure. You may request assistance in writing from the SML to determine if your actions fall within the definitions of regulated activities by sending an e-mail to Licensing at nmls@sml.texas.gov or mailing us. Our contact information can be found at: https://www.sml.texas.gov/tdsml_contact_us.html.

We are a HUD Certified Foreclosure Prevention Counseling Agency that is a 501(c)(3) non-profit that provides guidance to our clients and works closely with them and their lenders in an attempt to prevent a foreclosure. We may receive some compensation from 995HOPE.org or other HUD funds or foundation grants for these programs aimed at keeping people in their homes and neighborhoods stabilized. Do we have to be licensed under the SAFE Act?

While your activities do come close to the defined activities in the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009 (“ACT”), your activities are NOT subject to registration and licensing as the Act does not specifically apply to counselors who are an employee of a 501(c)(3) HUD-Approved Housing Counseling Agency when engaged in activities (outlined in 24 CFR Part 214) such as foreclosure prevention counseling, pre-purchase counseling, and reverse mortgage counseling, but not engaged in originating loans or the decision making process of loan organization.

Where can I find an NMLS Approved Education provider?

The NMLS approved course providers and their contact information is located at the following web page: https://mortgage.nationwidelicensingsystem.org/courseprovider/Pages/Resources.aspx.

Licensing is a new process for us, and we want to be compliant with federal and state applicable laws. How do we get a License?

The Nationwide Mortgage Licensing System (NMLS) will guide you through every step. You will have two tracks happening simultaneously, one for your Non-Profit and one for each person that will be originating residential mortgage loans. If you have any questions during the process, visit the Quick Guides page that provides helpful section instructions at: https://mortgage.nationwidelicensingsystem.org/slr/resources/Pages/QuickGuides.aspx or you can call the NMLS Help Line at (855) 665-7123.

A step by step process for the company can be found at: https://mortgage.nationwidelicensingsystem.org/slr/resources/Pages/

A step by step process for an individual can be found at: https://mortgage.nationwidelicensingsystem.org/slr/resources/Pages/

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