The Paper Source Virtual Note Symposium October 2020

TX Mortgage Commissioner Sets The Record Straight On The SAFE Act

by Doug Foster
Texas Department of Savings and Mortgage Lending

I am fully supportive of a return to Texas law prior to being preempted by the SAFE Act. The statute Texas FINANCE CODE CHAPTER 156. MORTGAGE BROKERS SUBCHAPTER A. GENERAL PROVISIONS § 156.202. EXEMPTION (3) and the rule TITLE 7 PART 4 Chapter 80 SUBCHAPTER A RULE § 80.1(6)(B)(ii) both offer only a partial exemption and call for the licensing of any individual owner of real property who engages in the originating six or more transaction in ANY rolling 12 month period.

When we find (a violation) we consider imposing penalties that range from $1,000 to $1,000 per violation and full restitution of all fees collected.

We have not submitted anything to HUD related to this issue. We have written a letter to the Texas Association of Realtors in support of a deminimis exemption (5 or less per rolling 12 month period.) HUD initially rejected that proposal, (HUD rejected all three instances where the Texas SAFE Act varied from the Federal law and the State Safe Harbor language. However, this was not an issue as it does not currently appear in Texas SAFE law (no exemption at any level).

I can not draw any conclusions from the (lack of) complaints (arising out of seller carryback transactions) because Seller Financers are also not required to provide complaint disclosures telling people to file any complaints with our office.

Is there going to be random checking (of unlicensed individuals) to determine if people originating loans are properly licensed?

There is no way for us to identify all the individuals out there. However, let me assure you that we have added multiple classes of new licensee populations over the last 11 years and those who do get licensed like nothing more than ratting out those who are not. We take every one of those referrals very seriously and in order to drive compliance with will deal with those caught in the harshest terms. To do anything less is unfair to those who have chosen to abide by the law. Any suggested guidance to take your chances is unwise. As for those who are licensed they will all be subject to random examination)

What happens if a buyer in an owner finance transaction files a complaint against the Seller?

We will investigate and when appropriate asses fines and restitution. Without a license we would have limited means of collection. But…we (turn) our unpaid fines over to the Comptroller and to the Attorney Generals Office for collection.  (Commissioner Foster added that in cases where an unlicensed individual defrauds a consumer and does not make it good, they would refer the case to the Attorney General who would then decide whether to refer it to the local District Attorney.). Mortgage fraud is an extremely hot and high profile issue and don’t be surprised if a DA takes on a case like this because it is a slam dunk under the umbrella of mortgage fraud – you were licensed or you were not.

Does the fact that a licensed Loan Originator was not utilized in a closing affect the validity or enforceability of the deed of trust lien or note?


Does somebody who purchases a note have liability if a licensed Loan Originator was not involved in the original transaction?


We have gone out of our way far and above any other state or any other agency to be available, to send out emails, to posting information on our website and, to visit personally with trade groups. I would ask that everyone return to the favor to us and allow us to review any information that you wish to share with a larger group.

Doug Foster
Texas Department of Savings & Mortgage Lending
(512) 475-1353

2 thoughts on “TX Mortgage Commissioner Sets The Record Straight On The SAFE Act”

  1. Has Texas exempted non-profits and local governments who deal with HOME/CDBG funds from the licensing requirements? It seems unnecessary since city employees do not benefit directly from the sale of homes and most programs are established to assist low income families not take advantage of those homebuyers.

    1. I asked Caroline C. Jones, General Counsel of the Texas Department of Savings and Mortgage Lending, to respond to your question. Here is her reply:

      “The Texas Department of Savings and Mortgage Lending has determined that a non-profit organization or government agency providing down payment assistance that places a lien on the property, even if the lien is forgivable, must hold an Auxiliary Mortgage Loan Activity License (company and individual RMLO). Our opinion is that “compensation” can include salaries. There is an exemption for entities that provide loans through a “boot strap program” that requires labor in exchange for financial assistance in the Texas SAFE Licensing Act, Finance Code Chapter 180.003(6). HUD has previously indicated to the Texas Department of Savings and Mortgage Lending that this exemption is not in compliance with the federal SAFE Licensing Act. The Department has deferred any further action until HUD publishes its long awaited final SAFE rules.

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