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The Texas T-Safe act

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  • #6288
    Avatar of gshepherd
    gshepherd
    Member

    I would like to hear from those doing EHT business in Texas how they are going to amend their business practice in future. The T-Safe act became effective May 29th 2010.

    I see the options as
    1) become licensed
    2) team up with a RMLO (residential mortgage loan officer).
    3) believe landtrusts fall outside the act

    I was at a presentation by the head of Texas Savings and Loans and if you take an “application” from a potential buyer for a house that is not your primary residence you now have to be a registered RMLO. You are also required to close at a Title office.

    The Texas definition of “application” is (in short) “for a residential property, discussing price and/or rate and/or term(s)”. Thus discussing the terms of a 3rd party EHT landtrust ie MAV and/or monthly payments now requires us to be licensed.

    I would like to keep this discussion on how to meet the requirements of the T-Safe act and ask that personal opinions about this act be in another thread.

    Thanks
    GS

    #32247
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    There is really nothing to discuss because it doesn’t apply in our case, even if it were able to be enforced.

    The main reason is that the EHTrust IS NOT a “Seller Carry or Assisted Form of Financing”, period.

    An Owner/Beneficiary lives in their own property via a Net Lease with the right to purchase or sale later with “permanent” financing. That means NO SALE takes place until such time. The EHTrust IS NOT a deferred sale, delayed sale, land contract, contract for deed, or any other form of “Seller Financing”, etc.

    It is also my understanding that the SAFE ACT only applies to Non-Owner Occupied Properties.

    #32248
    Avatar of dgraber
    dgraber
    Member

    On May 20, I attended a local REIA meeting in Dallas where Tony Florence, the chief Broker Examiner, on behalf of the Texas Department of Savings and Mortgage Lending, gave the evening presentation on the Texas implementation of the S.A.F.E. Act. He did state that the act did not apply if the prospective buyer (of a property where owner financing was discussed) was not intending to be an owner-occupant of the property. The question of at what point such an investor might change his mind and decide to live in the property without triggering a SAFE Act consequence was left without an answer.

    During the Q&A I asked him for his opinion on the use of a Texas land trust. I posed the question in roughly this way–trying to keep the terminology and example as simple as possible for him:

    “Suppose any of us with a free and clear house placed it into a Texas land trust, and leased it to a tenant who was granted a small percentage of the beneficial interest in that trust, which owns the house. No sale has taken place, or is contemplated as long as the trust exists. Over the lifetime of that trust, the tenant purchases additional percentages of beneficial interest on an “owner financed” basis from the former owner in case he should happen to decide to purchase the house when the trust eventually sells it. During that time he is purchasing personalty, not realty which might be governed by the Texas SAFE Act. Can you think of any reason whatsoever why the Texas SAFE Act might even remotely apply to this transaction?”

    He was utterly dumbfounded. He had no idea what I was talking about, had never heard of a land trust, and had no answer at all. Remember as Chief Broker Examiner, he has responsibility for the training and knowledge of the state-mandated RLMO seller-financing “expert” intermediaries who would get their pound of flesh from most seller financing transactions.

    Then I turned the same question to Bryan Dunklin, a Dallas area attorney who has done a lot of local research on land trusts in Texas (and who sells a competing DIY wrap-around mortgage course) with whom Bill Gatten has tangled a few times. Bryan was sitting on the front row. Bryan refused to answer the question, saying only that his private consultation rate was $250 per hour.

    #32249
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    I’m not even going to read his response… why, because…

    1. His response would be moot because it doesn’t apply

    2. He has no idea how a real NARS EHTrust is designed to work, forget about a “Texas Trust”.

    #32250
    Avatar of mrastegari
    mrastegari
    Member

    FYI. Here is another one (Change in the Control or Ownership of an Entity):

    Effective as of 2010, whenever there is a change in the control or ownership of a legal entity, which owns or leases real property in California, the acquirer of such an entity must file a notice (see reference below) of said change with the Board of Equalization???s (BOE) office in Sacramento within 45 days of the change. [Revenue & Taxation Code ???? 480.1 and 480.2]

    For more information, visit the Board of Equalization???s website at http://tinyurl.com/23j5h8e and for their PDF form BOE-100-B and instructions on filling it out, go to http://tinyurl.com/2968zj6.

    #32251
    Avatar of mtnwizard49
    mtnwizard49
    Member

    You guys need to learn more about trusts. We don’t own or lease real property in California. We own PERSONAL PROPERTY — the beneficial interest in the trust.

    #32252
    Avatar of dgraber
    dgraber
    Member

    Per Scott Moyes:
    “I’m not even going to read his response… why, because…

    1. His response would be moot because it doesn’t apply…”

    That was the point my question was intended to make for the audience, and I believe it did–in full support of the trust concept. And yes, I simplified the labeling to “Texas land trust.” He couldn’t have distinguished a NARS EHTrust from streptococcus.

    #32253
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    @mrastegari wrote:

    FYI. Here is another one (Change in the Control or Ownership of an Entity):

    Effective as of 2010, whenever there is a change in the control or ownership of a legal entity, which owns or leases real property in California, the acquirer of such an entity must file a notice (see reference below) of said change with the Board of Equalization???s (BOE) office in Sacramento within 45 days of the change. [Revenue & Taxation Code ???? 480.1 and 480.2]

    For more information, visit the Board of Equalization???s website at http://tinyurl.com/23j5h8e and for their PDF form BOE-100-B and instructions on filling it out, go to http://tinyurl.com/2968zj6.

    Read it carefully and see if you can figure out why this doesn’t apply to an EHTrust transaction.

    Can you say Functional Fixedness and Cognitive Rigidity?

    #32254
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    @mtnwizard49 wrote:

    You guys need to learn more about trusts. We don’t own or lease real property in California. We own PERSONAL PROPERTY — the beneficial interest in the trust.

    That’s only a small part of it, but there’s more. Anyone care to take a whack at it?

    #32255
    Avatar of shortsaleguy
    shortsaleguy
    Member

    Change in Control and Ownership. Control is still with the Beneficiary which is the owner of record. Ownership is in the Trust which is controlled by the Owner of record. So none of this applies to us EHTrust people. I see why they are doing this though. They want a handle on all this fraud that is going on with assignments to nowhere.

    Scott what this tells me is we had better get moving quick. This is the best time for us. They do not mess with Trusts. This is how the wealthy operate in our country. They will not mess that up.

    #32256
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    @shortsaleguy wrote:

    Change in Control and Ownership. Control is still with the Beneficiary which is the owner of record. Ownership is in the Trust which is controlled by the Owner of record. So none of this applies to us EHTrust people. I see why they are doing this though. They want a handle on all this fraud that is going on with assignments to nowhere.

    Scott what this tells me is we had better get moving quick. This is the best time for us. They do not mess with Trusts. This is how the wealthy operate in our country. They will not mess that up.

    Close enough and you are right, we all need to get going. This is an incredible opportunity for all NARS Members and Associates.

    #32257
    Avatar of mtnwizard49
    mtnwizard49
    Member

    shortsaleguy wrote:

    Change in Control and Ownership. Control is still with the Beneficiary which is the owner of record. Ownership is in the Trust which is controlled by the Owner of record. So none of this applies to us EHTrust people. I see why they are doing this though. They want a handle on all this fraud that is going on with assignments to nowhere.

    Wrong. The Beneficiary is NOT the owner of record. Neither is the trust. Full legal and equitable title rests with the TRUSTEE, not the Trust, and not any Beneficiary. You are correct as to control only.

    Make sure that you are careful not to spread misinformation because many NARS members read this board and depend upon the info presented to be accurate.

    #32258
    Avatar of gshepherd
    gshepherd
    Member

    @mtnwizard49 wrote:

    You guys need to learn more about trusts. We don’t own or lease real property in California. We own PERSONAL PROPERTY — the beneficial interest in the trust.

    Talking about Texas here. It says Texas in the subject so can we keep this thread just to Texas properties? thanks.

    Gary + Scott,

    I think there is an important hole on the RB side that you need to look at in more detail.

    The words were spoken by Doug Foster – head of SML in Texas. The main thing he kept reiterating was (not verbatim) “…the intention is there to lease a house to a third party and you, as an investor, do not own the house and do not intend to live in the house…”.

    The TEXAS definition of an application is important and I will repeat it here. When you discuss “the price of the house OR rate and term you are taking an application”. We all do that with EHT’s BEFORE the potential RB you speak to has any beneficial interest. Therefore you are on the owner finance side of the T-SAFE act. It seems like you have to give them an interest in the trust before you speak to them about MAVs or terms.

    Listening to Doug Foster I fear that landtrusts will be bundled up under the umbrella of owner finance and it will take a court case a few years down the line to actually say what the T-SAFE act applies to.

    Just as if you follow LFC and go to court, you may have the facts, you may be right, but the decision of a judge may go against you.

    On a side note the implementation has been delayed.

    Quote from Doug Foster 6/17:
    “I told the Mortgage Industry Advisory Committee that met yesterday that
    we intend to delay implementation until August 31st. We have not yet
    released a statement because we are trying to get clarification out of
    CBS as to whether or not we will be able to do anything on de minimus.
    We will have something tomorrow either way.”

    Doug Foster
    Commissioner
    Texas Department of Savings & Mortgage Lending
    (512) 475-1353

    official statement 6/18
    http://www.sml.state.tx.us/ResidentialMortgageLoanOriginator/documents/rmlo_listserv/rmlo_email_blast_20100618_seller_financing_deadline.pdf

    end quote

    #32259
    Avatar of sstanton
    sstanton
    Member

    Umm, I going to take a stab at this. I am still reeling over the lecture I got from Bill last summer about doing transactions in Texas.

    the price of the house OR rate and term

    We never, never discuss this, not even on the radar. We establish a Mutually Agreed Value between the seller and us. The party that will be the resident beneficiary only hears the lease and the benefits of being a beneficiary. A lease of a property is not a “rate and term”, it is just the rent the trust will collect.

    the intention is there to lease a house to a third party and you, as an investor, do not own the house and do not intend to live in the house

    First of all, in the terms he is referring to, WE ARE NOT INVESTORS, we are simply a beneficiary in a trust that holds the property. We are not leasing the property, one of the beneficiaries is leasing the property from the trust. We may or may not be that beneficiary.

    Therefore you are on the owner finance side

    Precisely why Bill got on my case last summer, I was talking to much about price and stuff. Don’t do that, simply explain the benefits of being a beneficiary.

    Remember, only the owner can put the property into the trust, we don’t do that. Only the owner can assign beneficial interest to us. We, the owner and us, can then assign BI to another individual, should we so desire. One of the beneficiaries may lease the property from the trust.

    The RB gets all the benefits of home ownership,without a new loan. The MAV is simply a starting point to determine whether or not any appreciation has occurred. It is not a price. The RB does not have an option to buy or any contract to buy. He is just a Beneficiary that leases the property from the trust. At the termination of the Trust, the RB has the right to purchase the property, but can pass on it with out penalty.

    That is my stab…

    #32260
    Avatar of buzzbox
    buzzbox
    Participant

    “…the intention is there to lease a house to a third party and you, as an investor, do not own the house and do not intend to live in the house…”.

    The trustee holds the legal and equitable title to the real property and is therefore the owner. The owner (Trustee) leases the property, not an investor. The other parties, SB, IB and RB only hold personal property beneficial interests in the trust and not the realty.

    My take on it.

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