The SAFE Act and the Real Estate Investor

SAFE Mortgage Licensing Act

How The Act Affects Real Estate Investors

Real Estate investors contend with all sorts of laws which are different in every state and county. One way this has been done by the states is to require certain activities to be performed only by licensed persons.

Examples of this are the licensing of Realtors, Contractors, and others. The affect of the licensing of any area creates a barrier for others to perform those same activities.

License requirements are more about what is required by the licensed person and what they can and cannot do than they are about who can’t do the particular activity.

Fortunately, real estate investors are very creative. Since their investing actions are not restricted to just activities that realtors or contractors or loan officers do they always find ways to avoid license activities.

This new Loan Originator License will be required by every state. This is a mandate from the federal level. It was part of “The Housing and Economic Recovery Act”. It is called the “SAFE Mortgage Licensing Act”.

Every state has until the end of 2010 (or before) to create and enact a license requirement for mortgage loan originators.

It states that “Only” Licensed Mortgage Originators may take mortgage loan applications, offer or negotiate terms of a residential mortgage loan for compensation or gain. Assist a consumer in obtaining or applying to obtain a residential mortgage loan by advising on loan terms (including rates, fees, other costs), collecting information on behalf of the consumer.

Taking an application also means receipt of an application for the purpose of deciding whether or not to extend the requested offer of a loan to the borrower, whether directly or indirectly. Plus a number of other requirements.

This act is to protect the end user (borrower – to be owner). It does not apply to commercial deals.

This license does not apply to the real estate investor when they are buying a property.

It applies when the investor sells a property to an end user and when that end user applies for residential mortgage loan.

The real estate investor may buy from anyone and sell to anyone that is NOT a end user (borrower – to be owner) who applies for a residential mortgage loan.

Thus the real estate investor may buy, sell to a wholesaler or another investor, buy and sell any commercial property, and anything that does not involve a residential mortgage loan.

This does give the real estate investor problem with subject-to, wraps, and investor taking a 2nd mortgage.

Be sure to check with the license requirements are for any state that you are going to do business in.

The SAFE Act and the Real Estate Investor