Residential Seller Financing under the CLA
Revised October, 2014 - 1
Residential Seller Financing under the Consumer Loan Act
Financing the sale of residential real estate is regulated at both the state and federal levels. In
Washington the Consumer Loan Act, chapter 31.04 RCW and chapter 208-620 WAC, regulates lending
money or extending credit for family, personal, or household use. This includes financing residential
mortgages and that may include financing the sale of raw land or vacant lots. Regulation under the
Consumer Loan Act begins with the licensing process. Licensing is twofold in that both companies and
individual mortgage loan originators must license. There are some exemptions from licensing at both
the company and individual levels. The company level exemptions are found at RCW 31.04.025
1
. The
individual level exemptions are found at WAC 208-620-105
2
. See also Interpretive Statement 2010-1
3
.
The Consumer Loan Act implements one federal law concerning residential mortgages: the SAFE
Act
4
. This federal law and accompanying regulations
5
require the state licensing of individuals who act
as residential mortgage loan originators.
Under RCW 31.04.025(3) the director may provide a license waiver at the company level if the federal
SAFE Act does not apply to the transaction at the individual level. The director interprets this authority
in part, in Interpretive Statement 2010-1 by providing that a license waiver is not required if an
individual sells the home he or she is living in and carries some or all of the financing for the sale. An
individual extending credit on a home they own but do not live in requires additional analysis because
that activity does not have an outright exemption from SAFE. When there is not an outright exemption
from SAFE, Appendix B in the implementing regulations discusses another concept, habitualness, that
when applied to the transaction, may allow a determination that SAFE does not apply. An individual
may not be considered a mortgage loan originator under the regulations if they do not engage in the
activities of a mortgage loan originator “habitually” or in the “commercial context” or they are not “in
the business” of engaging in those activies. An individual seller who declares they do not habitually
finance residential mortgages, do not finance residential mortgages in a commercial context, or are not
in the business of financing residential mortgages, may be eligible for the license waiver under RCW
31.04.025(3).
To receive a license waiver contact the department directly. The waiver has three conditions:
1. If the seller does not provide the borrower with a Good Faith Estimate pursuant to RESPA
6
,
he or she must provide the buyer with a disclosure summary of the loan’s material terms and
conditions. Access a compliant form from the department’s web page on Residential Seller
Financing. Print, complete, and provide the applicable form to the borrower.
2. In order to foreclose the seller must follow the specific foreclosure process set forth in
chapter 61.24 RCW or as otherwise required by Washington law.
1
http://app.leg.wa.gov/rcw/default.aspx?cite=31.04.025
2
http://app.leg.wa.gov/wac/default.aspx?cite=208-620-105
3
http://dfi.wa.gov/cs/interpretive_statements/consumer_loan/IS-2010-01.pdf
4
The Secure and Fair Enforcement for Mortgage Licensing Act of 2008, title V of the Housing and Economic
Recovery Act of 2008 (S.A.F.E. Act) (12 U.S.C. 5101 et seq.).
5
12 CFR 1007 (federal regulation) and 12 CFR 1008 (state licensing).
6
Regulation X, 12 CFR 1024.