Seller

When is a seller financer a loan originator?

Seller financers that engage in a minimum number of transactions are considered creditors under the Truth in Lending Act (TILA) and Regulation Z, and as such must be licensed.

Seller financers are excluded from the definition of loan originators if:

1. They are a natural person, estate, or trust and provide seller financing for only one property in any 12-month period.

2. They are any type of seller financing entity and finance the sales of three or fewer properties in any 12-month period.

Specifically, under the first special exclusion, if a seller financer is a natural person, estate, or trust, they are not a loan originator if:

  • They provide seller financing for only one property in any 12-month period.
  • They owned the property securing the financing.
  • They did not construct, or act as a contractor for the construction of a residence on the property in the ordinary course of business.
  • The financing meets these requirements:
    • Has a repayment schedule that does not result in negative amortization.
    • Has a fixed rate or an adjustable rate that resets after five or more years. Rate adjustments may be subject to reasonable annual and lifetime limits. If the financing agreement has an adjustable rate, you must determine the rate by adding a margin to an index rate. The index you use must be widely available, such as the U.S. Treasury securities, Cost of Funds, or LIBOR indices.


Implementation Tip: An annual rate increase of 2 percentage points or less and a lifetime increase limitation of 6 percentage points or less is reasonable. You may choose a minimum floor. The maximum ceiling may not exceed the usury limit applicable to the transaction.

Under the second special exclusion, a seller financer (regardless of whether a natural person, estate, or trust), they are not a loan originator if:

  • They provide seller financing for three or fewer properties in any 12-month period.
  • They owned the properties securing the financing.
  • They did not construct, or act as a contractor for the construction of, a residence on the property in your ordinary course of business.
  • The financing meets the requirements below. The financing must:
    • Be fully amortizing.
    • Has a fixed rate or an adjustable rate that resets after five or more years. These rate adjustments may be subject to reasonable annual and lifetime limits. If the financing agreement has an adjustable rate, you must determine the rate by adding a margin to an index rate. The index you use must be widely available, such as the U.S. Treasury securities, Cost of Funds, or LIBOR indices.
    • Must determine in good faith that the consumer has a reasonable ability to repay the loan. 

Documents Needed:

In order to engage the services of an RMLO, the following items are required from the Seller:

  • Seller Carryback Agreement
  • Seller carryback terms, including:
    • Property Address
    • Sales Price
    • Down Payment
    • Carryback Amount
    • Interest Rate
    • Term/Amortization
    • Monthly Payment
    • Will an Account Servicing account be set up? If so,
      • Monthly fee
      • Will taxes and insurance be collected?
        • Monthly amount for each
  • Pay the $495 report fee here.

Good Steward Lending Services, Inc.

(520) 323-3300 Office
(520) 257-2662 Fax

NMLS #1215158
AZ MB #0928134
CA DRE #01527180

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333 N. Wilmot #340,
Tucson, AZ 85711