Does a seller providing the seller financing need to be licensed as a mortgage lender under the MBLSLA?

The seller providing the seller financing is a “mortgage lender” as defined under Section 1a(q) of the MBLSLA. The seller must be licensed as a lender unless a licensing exemption in Section 25 of the MBLSLA applies.

An exemption for lenders with limited activity is provided in Section 25(g), which states:

“This act does not apply to the following:
(g) A mortgage lender that in the aggregate with any affiliates makes 10 or fewer mortgage loans in a 12-month period from January 1 to December 31.”

Seller Financing Examples

Note: All examples below involve residential mortgage loans and meet the MLOLA definition of “originate.”

  • Property owner A owns forty acres of farm land and sells three one-acre lots along the road frontage to unrelated individuals. The sales all occur within the same calendar year. Property owner A sells the lots to the individual buyers utilizing land contract agreements. Property owner A does not engage in any other activity under the MLOLA.

    Property owner A is not required to be licensed as a mortgage loan originator because he is not originating more than three mortgage loans in the calendar year and is not considered to be engaged in the business of mortgage loan origination.
     
  • Investor X purchases twenty foreclosed properties and sells each property to other individuals. The sales all occur within the same calendar year. Investor X sells the properties directly to the individual buyers utilizing land contract agreements.

    Investor X is required to be licensed as a mortgage loan originator because she is engaged in the business of mortgage loan origination.
     
  • Property owner Y sells the family vacation home to his child utilizing a land contract agreement.

    Property owner Y is not required to be licensed as mortgage loan originator because the transaction meets one of the statutory exclusions. He is not engaged in the business of a mortgage loan originator based on this transaction.
     
  • Landlord Q sells seven individual properties that she has accumulated over several years to unrelated individuals. The sales all occur within the same calendar year. Landlord Q sells the properties directly to the individual buyers utilizing land contract agreements.

    Landlord Q is required to be licensed as a mortgage loan originator. Given the number of transactions in a calendar year, she is engaged in the business of mortgage loan origination. In this example, if Landlord Q decides to sell only three properties in a given calendar year, licensure as a mortgage loan originator may not be required if Landlord Q does not conduct any other activity considered to be in the business of mortgage loan origination.
     
  • Builder Y sells five new homes that he built to unrelated individuals. The sales all occur within the same calendar year. Builder Y sells the properties directly to the individual buyers utilizing land contract agreements.

    Builder Y is required to be licensed as a mortgage loan originator because he is engaged in the business of mortgage loan origination.
     
  • Real estate salesperson Z assists the seller with the sale of the seller’s personal residence. The seller is financing the sale on a land contract. Real estate salesperson Z is compensated for her real estate brokerage activities. Real estate salesperson Z is also compensated beyond customary real estate brokerage fees for her work assisting the seller in originating the land contract.

    Pursuant to Section 3(l)(ii) of the MLOLA, real estate salesperson Z is required to be licensed as a mortgage loan originator because she is engaged in the business of mortgage loan origination.