The Kestner Team

Owner/Seller Financing:

Some of you already know that “seller financing” has been a topic of discussion “Federal SAFE Act”.   I quite honestly lost track of whether it was finalized or still being discussed.  However, you can find all pertinent information at this link:  http://www.ffiec.gov/safeact.htm

The Tennessee Association of Realtors just received an opinion letter from the Commissioner of Financial Institutions. This letter clarified and provided some additional limited exceptions to the Tennessee Residential Lending, Brokerage and Servicing Act (Tennessee's response to the federal SAFE Act). Prior to this letter being released on November 30, 2010, the only exemptions from licensure were if the seller was selling his residence or funding a loan for an immediate family member.

However, under this new opinion, there is a limited exception for individuals (this means that the person owns it in his own name - not that of a company such as an LLC, corporation, etc.). Pursuant to this letter opinion "For the present time and subject to a final rule, regulation, interpretation, or formal guidance of the federal S.A.F.E. Act indicating otherwise from HUD, the Department interprets an individual who, as a seller of his or her own real property, makes five (5) or fewer residential mortgage loans within any twelve (12) month period as exempt from the Mortgage Act. PLEASE TAKE NOTICE that, when and if HUD issues a final rule, regulation, interpretation, or formal guidance of the federal S.A.F.E. Act that is contrary to this position, the Department will have no alternative but to rescind its position and enforce said final rule, regulation, interpretation, or formal guidance. Thus, if HUD makes a determination that the Department's position is inconsistent with the federal SAFE Act, the Department reserves the right to withdraw its position in order to be consistent with federal law."

It appears as though this issue is quite complicated and the language still being interpreted.  Therefore, if you are thinking of offering owner financing on any of your properties, I strongly urge you to check with your attorney first.