The final SAFE Act regulations appear to exempt seller carry back loans if the individual is not engaged in the “business” of a Mortgage Loan Originator. In the appendix, page 146, (b) the regulations say:

Not Engaged in the Business of a Mortgage Loan Originator. The following examples illustrate when an individual generally does not “engage in the business of loan originator”:

(b) An individual who acts as a loan originator in providing financing for the sale of a property owned by that individual, provided that such individual does not engage in such activity with habitualness.

This example along with Section 3400.103 (b) Individuals required to be licensed by states. Page 117-118:

(b) An individual engages in the business of loan originator if the individual, in a commercial context and habitually or repeatedly:

(1)(i) Offers or negotiates terms of a residential mortgage loan for compensation or gain; or

(2) Represents to the public, through advertising or other means of communicating or providing information (including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items) that such individual can or will perform the activities described in paragraph (b)(1) of this section.

See also:

Page 40 of the final regulations:

“While the fact that the seller has not lived in the properties being sold would make it more likely that financing is provided in order to obtain a profit, and would therefore make it more likely that a commercial context is present, the infrequency with which a particular seller undertakes such actions, combined with the fact that it is the individual who is providing the financing rather than a business entity that regularly provides financing), may mean that the requisite habitualness needed to constitute engaging in the “business” of a loan originator is absent. On the other hand, for example, a builder who repeatedly acts as a loan originator in the course of selling homes he or she has constructed would almost certainly satisfy the requirements of a commercial context and habitualness or repetition and, accordingly, would be subject to SAFE Act licensing requirements.”

We will have further analysis of this new rule in the coming weeks.