DFI has received a number of telephone calls recently from real estate professionals with questions about private lending of residential mortgages under the Consumer Loan Act (CLA), chapter 31.04 RCW and chapter 208-620 WAC. We believe the questions arise from various sources of information based on changes in state and federal law. Those changes however do not affect the specific issue of private lending under CLA. Hopefully the following information will clarify this matter.
There is not a statutory exemption in the CLA for “private lending,” “hard money lending,” or “seller financing” when the loans are for family, personal, or household use and secured by a dwelling (as defined in the Truth in Lending Act). DFI did at one time, before passage of the federal SAFE Act (the licensing law for mortgage loan originators), allow five loans per year, with some conditions, with no license. That has not been available since approximately June, 2009. The CLA was amended in 2009 to give the director authority to waive the licensing provisions of the CLA under certain circumstances. See RCW 31.05.025(3). DFI has provided some licensing waivers using that authority.
DFI plans to rulemake on this topic this summer and will consider implementing another de minimis standard as allowed under the licensing waiver authority. The standard will address the need for private lending, protection for borrowers, and the restrictions in the CLA.
If you are aware of private lending that seems more like conventional lending and not lending based on limited circumstances, let us know so we can look into it.
In the meantime, if you have questions, contact Cindy Fazio at 360-902-8800.
Watch for the ListServ on the rulemaking and plan to provide your comments.
If you are not signed up for the ListServ, you can do so here: www.dfi.wa.gov/cs/listserv.htm.