Some good news: common sense is finally being applied to the implementation of regulatory restrictions on seller-financing.The Texas Land Title Association Department of Government Affairs has just issued this update:
Doug Foster, Commissioner of the Texas Department of Savings and Mortgage Lending, has written that the Department will continue to allow the statutory seller finance de minimis exception, which has long been allowed under Texas statute but had been placed in doubt since the recent passage of the Texas SAFE Act.
The federal SAFE Act requires all mortgage loan originators to be licensed in each state. During the 81st Legislative Session the legislature passed the Texas version of this requirement. Since the passage of the new law, the status of the de minimis exemption, which allows for a limited number of transactions each year, has been in question. The exception says that no license is required to seller finance transactions of five or less in a 12-month period.
“The Department has spoken with numerous citizens directly and staff members from the offices of 13 legislators whose constituents are economically impacted by the loss of a de minimis exemption from licensure,” Foster writes in the notice. “Seller financing in part or in whole has historically been an important part of facilitating real estate sales transactions. To depart from long standing Texas de minimis tradition in the midst of the current credit restrictions and a market where sellers are having difficulty selling homes would run counter to the efforts of stabilizing the housing market and reviving the economy.”
U.S. Rep. Barney Frank, Chair of the House Committee on Financial Services and U.S. Rep. Spencer Bachus, a ranking member of the same committee, were the primary authors of the federal SAFE Act. In a letter dated July 22, the members stated they, “think it is permissible for States to consider a de minimis standard for registration and licensing requirements under the act…”
The Department will continue to allow the exception unless there is a subsequent statutory amendment adopted or if HUD determines that no seller financing de minimis exception is appropriate under the SAFE Act.
As we previously reported, legislation will also likely be filed during the 82nd Texas Legislative Session to add the five or less exemption to statute. The statute is already in existence in Chapter 156, Finance Code, but may be added to Chapter 180, SAFE Act.
TLTA will continue to monitor this issue and provide updates if there are any new developments. If you have any questions, please contact Aaron Day, TLTA Director of Government Affairs and Counsel at 512.472.6593.