A Thanksgiving Tale – Did The Indians Comply With The SAFE Act?

By:  Jeff Shiller, Esq.

It is November, 1621.  The Pilgrims have survived a treacherous settlement of Plymouth despite many of them being wiped out by exposure, scurvy and contagion.  In celebration of their first successful corn harvest, Governor Bradford and Chief Massasoit of the Wampanoag set down for a 3-day celebration.  Naturally, as Europeans like to do, Bradford decides to negotiate a deal to buy lands from the Wampanoag:

Chief: “How much you pay for plentiful bounty of these treasured Indian lands?”

Bradford:  “Alright Chief M., check this out.  If you hold a mortgage on the place, I’ll give you 5 clay pipes each year for the next 100 years, a turkey, and a wretched pestilence that will wipe out your entire civilization.  But first I need to see your originator license.  Also, what’s the APR on that seller take-back?”

Chief:  “Originator? What you mean Originator?”

Bradford:  “Look Chief M., to sell me your land you’re gonna have to pay the government money to get licensed as a ‘Mortgage Loan Originator.’  In order to do that, you’ve got to pay fees to get educated, then maybe even pay some more fees to get bonded.  See, it says it right here in the Federal SAFE Act.  Read it.”

Chief:  “But it says nothing about seller-financing.  ME NO NEED LICENSE.”

Bradford:  “Not so fast, Chief.  Let me explain.  See, you can’t just read the actual Act. Think of that as the ‘skeleton.”  You’ve got to read a bunch of other regulations from a bunch of other government agencies.  These regulations form the ‘meat on the bones.’  That’s how the government sticks in a bunch of crap that nobody understands.  Once the regulating agencies stick in the regulating agency crap, the Act becomes law.  In this case, it was several government outfits: HUD, Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation (“FDIC”), Office of Thrift Supervision, Farm Credit Administration, and National Credit Union Administration.  They wrote a 50-page “Final Rule” which, along with the actual ‘SAFE Act’ has become the law of the land.

Chief:  “Who’s land?

Bradford:  Well, forget that for now.

Chief:  “OK.  Me Read.  Still see nothing that talks about my private sale to you.”

Bradford:  “Correct, but look at the definition of ‘Mortgage Loan Originator’ – ‘an individual who takes a residential mortgage loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain.’  And neither the SAFE Act nor the ruling agencies have excluded private sellers from that definition.  So, sorry Chief, but our big, fat government has decided it can stick its nose in our private business and there’s nothing we can do about it.”

Chief:  “AHA!  But I make no compensation or gain.  You simply take all our lands, rip us off, and kill us – so I no part of law.”

Bradford:  You’re a real hoot, Chief.  You may be right but, unfortunately, our big fat government with its 50-page rule decided not to address exactly what that phrase means, so I’m not really sure.  They just said it includes ‘individuals who earn salaries, commissions or other incentive.’  But it could include other things.  Who the hell knows?

Chief:  “OK.  I follow.  But where does SAFE Act speak of APR? I see nothing.“

Bradford:  Nice pick-up Chief. What you have to understand is that the SAFE Act is just one Federal law surrounding one main issue: licensing mortgage loan originators.  There are other laws that will impact our transaction.  The 2 important ones are the Truth-in-Lending Act – known as TILA – where you have to disclose to me the Annual Percentage Rate of the loan, and the brand new, just-off-the-showroom-floor, Dodd-Frank Act.  And, I hate to break this to you Chief, but a lot of what I just told you may be changed by the Dodd-Frank Act.

Chief:  “What the f___ you mean, Pilgrim?”

Bradford:  Well, the Dodd-Frank Act is going to cover a lot of the same legislative territory as the SAFE Act.  And even though our big, fat government has already passed the actual ‘Act,’ there are as many as 243 separate rules yet to be drafted and 67 separate studies yet to be done before all those Federal agencies can publish their 4,499,444 page ‘Final Rule.’  So nobody really knows yet what’s going to happen.  One thing’s for sure, it’s going to change some of the stuff we just discussed.

Chief:  “This seems like much wasted money and time and expense for you Americans!”

Bradford:  Correct.  You see, Chief, our government has become so bloated that it can’t help itself from regulating more and more things it shouldn’t.  And it’s so broke now that it needs to add fees on top of fees – we call those ‘taxes in a different form’ – to feed itself and pay for all the entitlements we Americans can’t afford anymore.  The government is just too afraid to tell us this or do anything about it, so they’d rather just run us into the ground.

Chief:  “OK.  I sell you land, but we Indians can stay on land, right?”

Bradford:  Sure Chief, you have my word on it.  By the way, have you ever been to a casino?

NOTE:  Bradford never addressed how the local state laws may impact his seller-financed deal.  To understand that, read my last post about the SAFE Act

Til’ next time, Happy Thanksgiving!  Jeff