January 1, 2022 the new SB43 Wrap Mortgage Law went into effect.
What does this mean for investors doing owner finance wraparound mortgages?
First, no more tabletop closings, ALL owner finance wrap mortgages must be closed in a law firm or a title company. If not, your transaction is VOID!!
Second, any individual doing 3 or more wrap mortgages in a 12-month period, must be a licensed RMLO and or their company must be registered with the Texas Savings and Mortgage Lending Administration (meaning, RMLO must be part of that entity).
Will you be required to comply with the statute on every deal or just those after 3?
What if you are and failed to comply??
There are new contractual disclosures required whenever an existing mortgage is left in place. Failure to provide these can result in your transaction being completely unwound, and the 100% return of all monies paid to you by your borrower (with no reasonable rental amount due)!!
There are further financial penalties associated with not following the new law as well.
To become licensed in the State of Texas you must have pre licensing education, a Federal FBI background check, yearly CE credits, proper software, quarterly filings, and reporting with the NMLS and State mandated audits.
If you are wanting to sell your mortgage in the future, note buyers will most likely want to know that the transaction was originated in accordance with the Texas Property and Finance Code. They won’t want to buy a mortgage that could be unwound.
About OFN Loan Servicing Options
SO: How can OFN LENDING help me? If you do not want to be licensed and deal with all the compliance, there is a solution!!
At OFN Lending we are an Owner Finance Wrap Around Mortgage Originator/ Lender. We are your risk mitigator, we take on the risk and liability for you.
How do you do this?
OFN Lending will handle the origination and closing transaction. We act in the capacity of the lender of record, lending to the wrap borrower. We follow all the contractual and sale disclosure requirements, State and Federal as well as the new wrap disclosures. We ensure your documents in compliance, process your buyer (if requested), and underwrite the borrower. Once the transaction is closed, we assign that note back to the original Investor.
What will this cost me?
For just $2,500, we will process your borrower, underwrite your borrower, and negotiate with your borrower (subject to your direction). Review your mortgage documents, step into your shoes as the Wraparound Lender, and re assign the mortgage back to you.
Contact us today to discuss how we at OFN Lending can help you stay compliant.