Michigan’s Mortgage Loan Originator Licensing Act, MCL 493.131, et seq, (“MLOLA”) provides for the licensing and regulation of individuals originating residential mortgage loans. Generally speaking, a mortgage loan originator is defined as an individual who for compensation or gain takes a residential mortgage loan application and/or offers or negotiates terms of a residential mortgage loan, and meets other specified criteria. The Act became effective on July 31, 2009 to bring Michigan into compliance with the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the “SAFE ACT”). The SAFE ACT is a federal statute that was signed into law on July 30, 2008 that sets minimum standards governing state regulation of mortgage loan originators.
The SAFE Act and MLOLA both define a “residential mortgage loan” to mean any loan made primarily for personal, family or household use that is secured by a mortgage, deed of trust or other equivalent consensual security interest on a dwelling or on land on which a person intends to construct a dwelling. A land contract is a “residential mortgage loan” for purposes of the MLOLA.
“Seller financing”, or land contract financing, is the activity of an individual or entity that owns and subsequently sells a dwelling subject to the MLOLA, which is financed by the seller through a residential mortgage loan as defined by the MLOLA. Generally, the origination of only one land contract requires licensing under MLOLA. However, certain seller financing transactions may not require licensing under the MLOLA. Under the SAFE ACT, as interpreted by the State of Michigan, a mortgage loan originator license is not required for the following seller financing transactions, provided that such activity is not habitual:
Michigan has taken the position that the above transactions do not require licensing under the MLOLA – unless the number or frequency of the transactions indicates that the individual appears to be engaged in the business of mortgage loan origination. The State will presume the individual is “engaged in the business” if four or more transactions are originated within this twelve-month period, in which case the individual is required to be licensed as a mortgage loan originator.
If you intend to engage in four or more seller-financed transactions within a year, you may satisfy the MLOLA licensing requirements by working through a real estate broker or salesperson who is a licensed mortgage loan originator. A seller is not required to be licensed under the MLOLA or MBLSLA if the real estate broker or salesperson receives no additional compensation beyond the customary commission on the real estate sale for that transaction. The seller may be required to be licensed under MLOLA if the real estate broker or salesperson receives additional compensation beyond the customary commission on the real estate sale.
Various sanctions, including a civil fine in an amount not to exceed $25,000.00 per violation, may be imposed by the Commissioner against the seller for failing to comply with the provisions of MLOLA.
Seglund Gabe Pawlak & Groth, PLC
At Seglund Gabe Pawlak & Groth, PLC, we offer a wide range of legal services that pertain to real estate, including the purchase, sale, rental or lease of residential or commercial property. Our attorneys are qualified to represent both the buyers and the sellers in residential and commercial real estate transactions. They have experience in real estate finance and are capable of representing the interests of borrowers and lenders. Our attorneys also represent landlords and tenants in the drafting of lease documents. Our team of attorneys can prepare and review all of the documents that are necessary for a real estate transaction to ensure that everything has been drafted properly to protect your interests. In addition, our attorneys are experienced in litigation involving real estate including all aspects of the purchase, sale, or lease of property.
Seglund Gabe Pawlak & Groth, PLC
28345 Beck Road, Suite 301
Wixom, MI 48393
Phone: (248) 869-0030
Fax: (248) 869-0039