By Wendy Ceccherelli
Some of my most popular articles and blogs have to do with the rules and regulations around seller financing. Many notable changes occurred as a result of the passage of the Dodd Frank Act in 2010.
Financing the sale of residential real estate is regulated at both the state and federal levels. In Washington, the Consumer Loan Act, chapter RCW 31.04 and chapter WAC 208-620, regulates the lending of money or extension of credit for family, personal, or household use. This includes financing residential mortgages. Regulation under the Consumer Loan Act begins with the licensing process. Licensing is two-fold, in that both companies and individual mortgage loan originators must license.
There are some exemptions from licensing at both the company and individual levels. The company level exemptions are found at RCW 31.04.025. The individual level exemptions are found at WAC 208-620-105.
A license waiver is available pursuant to RCW 31.04.025(3) for eligible transactions under the Consumer Loan Act. The State Department of Financial Institutions (OFI) will issue a license waiver for eligible seller-financed residential mortgage loan transactions. An eligible transaction is one in which the seller owns the property being sold, is selling to a buyer for their family, personal or household use, is carrying the financing taking an interest in the property, and who is not subject to the federal law that requires the licensing of mortgage loan originators.
You may qualify for an outright exemption from the Consumer Loan Act. If you sell the home that was your primary residence and carry the financing for the sale, you are exempt from the Consumer Loan Act. You do not need a license or a license waiver. Also, you do not need a license or license waiver to lend money, secured or unsecured, to an immediate family
Additionally, you do not need a license waiver if you are carrying the financing on raw land, even if that raw land is zoned residential.
DFI provides forms for a license waiver, and disclosure summary forms to provide to the buyer for the type of seller-financed loan (fixed or variable rate interest).
Steps to claim an exemption for Seller Financing are as follows:
- Print the License Waiver
- Fill out the license waiver, including the declaratory portion at the bottom, and return it to the Department via email to Lucinda.Fazio@dfi.wa.gov, via fax to the attention of Cindy Fazio at 360-596-3868, or via hard copy to the Department to the attention of Cindy Fazio. You can now provide the completed License Waiver to the escrow or tide company or attorney.
- As to Item No.1 in the License Waiver, print, £ill out and provide the applicable disclosure summary to the borrower. That’s it!
More details may be found on the DFI website at http://www.dfi.wa.gov/residential-seller-financing. Happy Investing!
About the author …
Wendy Ceccherelli is the volunteer membership coordinator for REAPS. She has been a full-time real estate investor since 2006, and is the designated broker /owner of Home Land Seattle. She is also a developer of Van Gogh Studio Lofts, a transit-oriented development at the Rainier Beach Light Rail Station in Seattle. Prior to her career in real estate, she spent twenty-five years as a government arts funder. More information on real estate topics may be found on her blog at www.WendyWonder.Blogspot.com.
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