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The SAFE Act: Most Confusing Legislation of 2010?

Shae Bynes
2 min read

Today marks my 40th post for the BiggerPockets blog and yesterday I realized that up to this point I am yet to write a commentary.  That changes today.

Pardon my rant, but I think the responses to this post will help a lot of people.

Ok, seriously? I can’t think of anything that has been more confusing as the Secure and Fair Enforcement Mortgage Licensing Act (aka SAFE Act) in the real estate investing community this year.  The Act was first put in place in 2008, but recently there have been some updates made to the legislation (some of which won’t take effect until October 1). Depending on your strategy it may not mean anything at all to you, but as someone who leverages private money lenders and makes offers to homeowners that include owner/seller financing options, the SAFE Act has been a bit of a mind boggler.

I’ve spoken to real estate professionals and have also scoured the web for answers. A Google search on “S.A.F.E. Act and owner financing” or even a BiggerPockets forum search on “SAFE Act” will send your head spinning. So many different thoughts on the legislation.

I still have more questions than answers.  For example,

1) How does it effect seller financing for properties my company wants to purchase? We make cash and terms offers all the time!  If a homeowner wants to sell a property (one that is NOT his primary residence) to me and hold back a mortgage, does he need a license?

Fellow BiggerPockets blogger Clint Coons addressed this in his recent post “Are You Safe to Sell Under the SAFE Act?” and I’m still uncertain, but my take from that post is that the sellers I’m making offers to do not need to have a mortgage license in order to provide seller financing to me as an investor buyer.

2) How does it impact how my company works with private money lenders? Do they now need to have a mortgage brokers license to lend my company funds to purchase properties for long term hold? If so, is there a reasonable workaround?

3) Does each state have its own separate version of how this works and how it will be regulated?

I’m also unsure of how the federal and state governments will enforce all of this.  There seems to even be confusion among attorneys at the title companies regarding what’s ok and what’s not.  Thanks in advance to anyone who can shed some light here on what may be very well be the most confusing legislation impacting real estate investors in 2010.

So? Your Thoughts?

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.