The SAFE Act (S.A.F.E. Mortgage Licensing Act of 2008 found at 12 U.S.C. Section 5101) and its Texas equivalent T-SAFE (Finance Code Section 180.001 et seq.) require that sellers of non-homestead property to non-family members have a residential mortgage loan origination (RMLO) license.

The SAFE Act is enforced by the Texas Department of Savings and Mortgage Lending (TDSML). Under the classic seller-finance transaction, the seller is required to be licensed as an RMLO only if the property is not the seller’s homestead and/or the sale is not to a family member. For example, if the subject property is an investment rental condominium unit in Galveston being sold to a non-family member, then the seller is required to have an RMLO license from TDSML.

Fortunately, TDSML has ruled that the SAFE Act will not be applied to non-professionals—persons who make five or fewer owner-financed loans in a year, thus preserving the de minimis exemption under Finance Code Section 156.202(a)(3). Also, the SAFE Act licensing rule does not apply to seller-financing of commercial properties.

Unlicensed residential mortgage loan origination activity may subject the unlicensed individual to sanctions, administrative penalties, and even criminal charges.