Dodd-Frank, the SAFE Act, and Utah's 61-2c: When a Utah Seller Needs a License

Most Utah sellers who finance one sale of their own property do not need a mortgage license. The answer turns on four things: who you are, how many properties you finance in 12 months, whether the note has a balloon, and how many loans you make each year. Get those four facts straight, and the rules sort themselves out.

This page covers three layers. Federal Reg Z decides whether you are a "loan originator." The federal SAFE Act decides whether an individual needs a state license. Utah's own statutes, Title 61 Chapter 2c and Title 70D, add a state layer. Each layer has its own test. Passing one does not mean you pass the others.

If you want a fast first read on your facts, try the licensing checker. It asks six questions and points you to the exclusion that may fit. Then read on for the reasons behind the answer.

Do I need a license to seller-finance my home in Utah?

Usually not, if you are an occasional seller taking back a note on property you own. Utah exempts the seller who takes back security for the price, and federal rules exclude most one-off sellers from the loan-originator definition.

"Usually not" is doing real work in that sentence. The exemptions come with conditions. A balloon payment, an LLC as the seller, or a fourth sale in a year can change the answer. So can building the home yourself.

Here is the short version of each layer.

• Reg Z (federal). The Dodd-Frank rules on loan originators live in Regulation Z. Two seller-financer exclusions take a seller out of the loan-originator definition (12 CFR § 1026.36). Those are the "three-property" and "one-property" exclusions.
• TILA creditor status (federal). Separately, you become a TILA "creditor" after more than five dwelling-secured consumer credit extensions in the current or preceding calendar year (12 CFR § 1026.2).
• SAFE Act (federal and state). The SAFE Act licenses individuals who originate loans "in a commercial context and habitually or repeatedly" (12 CFR § 1008.103).
• Utah 61-2c (state). Utah's Residential Mortgage Practices and Licensing Act exempts the seller who takes back a trust deed (Utah Code § 61-2c-105(2)(i)).
• Utah 70D (state). Utah's Mortgage Lending and Servicing Act has a notification requirement with a casual-lender exemption (Utah Code § 70D-2-103).

No Utah rule was found that requires a private seller to hire a licensed loan originator (none found). That said, "legally allowed to" and "actually goes well" aren't always the same thing. A clean note, a recorded trust deed, and a servicer matter more to most sellers than licensing does.

What is the difference between the three-property and one-property exclusions?

The three-property exclusion covers any person, including an LLC, financing up to three properties in 12 months, but bans balloons and requires an ability-to-repay check. The one-property exclusion covers only individuals, estates, and trusts, for one property, and permits a balloon.

These two rules get mixed up constantly. The numbering matters, so here it is exactly.

12 CFR § 1026.36(a)(4), the three-property exclusion. Any person, including an entity, may qualify. You finance three or fewer properties in any 12-month period. Each property is one you own and that secures the financing. You did not build the home. The note is fully amortizing, with no balloon. You determine in good faith that the buyer has a reasonable ability to repay. The rate is fixed, or adjustable only after five or more years, with reasonable caps (12 CFR § 1026.36(a)(4)).

12 CFR § 1026.36(a)(5), the one-property exclusion. Only a natural person, an estate, or a trust may qualify. You finance one property in any 12-month period. You own it, and you did not build it. The note has no negative amortization, but a balloon is permitted. The rate is fixed, or adjustable only after five or more years, with caps. No ability-to-repay determination is required (12 CFR § 1026.36(a)(5)).

Two points trip people up. First, the three-property rule is the stricter one on terms, even though it allows more sales. Second, both are exclusions from the loan-originator definition, not from the Truth in Lending Act as a whole (12 CFR § 1026.36). The creditor threshold is a separate test, covered below.

Want to see what a balloon note versus a fully amortizing note looks like in dollars? Run both in the seller-carry calculator. On a $400,000 sale with $60,000 down, a $340,000 note at 7% over 30 years runs about $2,262 a month either way. The difference is whether a large balance comes due in year five or seven.

Can I include a balloon payment in a Utah seller-financed note?

Yes, if you qualify for the one-property exclusion. That means you are an individual, an estate, or a trust, and it is your only seller-financed property in 12 months. The three-property exclusion does not allow a balloon.

This is the question behind most searches about "Dodd-Frank seller financing balloon payment." Balloons are common in seller financing. A five- or seven-year balloon gives the buyer time to refinance with a bank. It also gets the seller cashed out on a known date.

The rule is simple once you see the table. The one-property exclusion permits a balloon, as long as the loan has no negative amortization (12 CFR § 1026.36(a)(5)). The three-property exclusion requires full amortization, which rules out a balloon (12 CFR § 1026.36(a)(4)).

So the balloon question is really a "who and how many" question.

• You and your spouse sell one rental and carry a note with a seven-year balloon. The one-property exclusion may fit.
• Your LLC sells one house and wants a balloon. The one-property exclusion does not cover an LLC, and the three-property exclusion bans the balloon.
• You personally sell a second property within 12 months and want another balloon. You are past one property, so the one-property exclusion no longer fits.

Risk comes first here, even when the rule allows the balloon. A balloon only works if the buyer can refinance or sell when it comes due. If rates rise or the buyer's credit slips, you may face a default instead of a payoff. Plan the exit before you sign. For more on structuring the balloon itself, see the balloon payment article.

How many properties can I seller-finance per year before Dodd-Frank applies?

It depends on the note. One property in 12 months under the one-property exclusion, or up to three under the three-property exclusion with no balloon. More than five dwelling-secured loans in a calendar year triggers TILA creditor status on its own.

People ask this as one question, but there are two counters running.

Counter one: the loan-originator exclusions. These count properties you finance in any 12-month period. The one-property exclusion stops at one (12 CFR § 1026.36(a)(5)). The three-property exclusion stops at three (12 CFR § 1026.36(a)(4)). If you go past the limit, or your terms don't match, the exclusion is gone for that loan.

Counter two: the TILA creditor threshold. This counts dwelling-secured consumer credit extensions per calendar year. You become a "creditor" after more than five in the current or preceding calendar year. A person who makes more than one high-cost mortgage in 12 months also qualifies (12 CFR § 1026.2).

Below the creditor threshold, several heavy federal rules fall away. The Reg Z ability-to-repay rule does not reach a seller who is not a creditor (12 CFR § 1026.43). The same seller is not required to give a Loan Estimate or Closing Disclosure under TRID (12 CFR § 1026.2; CFPB TILA-RESPA fact sheet).

RESPA is a third, related question. RESPA's "federally related mortgage loan" definition reaches regulated lenders and TILA creditors investing more than $1 million a year in residential loans. Occasional sellers fall outside it (12 CFR § 1024.2(b)).

Here is how that plays out. Say you sell two houses this year and carry both notes. You are under the creditor threshold. But you have financed two properties in 12 months, so only the three-property exclusion can fit. That means no balloons, a good-faith ability-to-repay review, and a fixed or long-fixed rate.

Note the ability-to-repay wrinkle. The three-property exclusion has its own good-faith repayment requirement, even if you are not a creditor (12 CFR § 1026.36(a)(4)). Keep a file. Pay stubs, tax returns, a credit report, and a written budget are the usual pieces.

What does the SAFE Act mean for a Utah seller carrying one note?

For most one-time sellers, very little. The SAFE Act licenses individuals who originate loans in a commercial context and habitually or repeatedly. Selling your own home once, and carrying the note, typically is neither.

The SAFE Act is a federal law carried out through state licensing. Its regulation targets individuals who act as loan originators "in a commercial context and habitually or repeatedly" (12 CFR § 1008.103). That phrase is the whole test for most sellers. One sale of your own house is not a business.

The regulation's Appendix A gives an example worth knowing. A seller financing the sale of their own dwelling, whose terms are negotiated exclusively by a licensed third-party loan originator, is not a loan originator (12 CFR Part 1008, Appendix A). Some sellers who do more deals use that structure on purpose.

Be careful with what the regulation does not say. There is no express exemption in the regulation text for selling to a family member or for selling your own residence (12 CFR § 1008.103). A family sale is not automatically outside the rule. The same "commercial context, habitually or repeatedly" test applies.

The practical pressure point is volume. An investor who buys and resells several homes a year, carrying notes each time, looks more like a business every year. That is where a licensing conversation belongs. For investor-specific structuring, see the investors page.

Does Utah's 61-2c licensing act exempt a seller who carries the note?

Yes. Utah's Residential Mortgage Practices and Licensing Act exempts a seller of real property who takes back a mortgage or trust deed as security for a separate money obligation. The exemption has no numeric cap.

Here is the exact text of the seller exemption in § 61-2c-105(2)(i). It exempts "a person who receives a mortgage, deed of trust, or consensual security interest on real property if the individual or entity: (i) is the seller of real property; and (ii) receives the mortgage, deed of trust, or consensual security interest on real property as security for a separate money obligation" (Utah Code § 61-2c-105(2)(i)).

Three things stand out in that language.

1. "Individual or entity." Unlike Reg Z's one-property exclusion, the Utah seller exemption covers LLCs and corporations too.
2. "Is the seller." The exemption is tied to the sale. It fits a seller carrying the price, not a person lending cash to a stranger.
3. No numeric cap. The statute sets no limit on how many properties you sell this way (Utah Code § 61-2c-105(2)(i)).

A second Utah exemption, § 61-2c-105(2)(h), covers a person who makes a loan secured by real property with their own money, for their own investment, who is not in the business of making such loans (Utah Code § 61-2c-105(2)(h)). That one fits a private lender more than a seller. It can matter if you are lending cash, not carrying the price.

The definitions frame both exemptions. A "residential mortgage loan" is credit secured by a one-to-four-unit dwelling in Utah. The "business of residential mortgage loans" means origination activities done for compensation (Utah Code § 61-2c-102).

Don't stop at the Utah answer. A Utah exemption does not change the federal tests. An LLC can be exempt under 61-2c and still fall outside both Reg Z exclusions because of a balloon.

Do I need to notify Utah's Department of Financial Institutions?

Probably not, if you make fewer than five mortgage loans a year or your loan runs two years or less. Utah's 70D act requires non-exempt lenders, brokers, and servicers to notify DFI and pay a fee.

Title 70D, the Utah Mortgage Lending and Servicing Act, is a different statute from 61-2c. Non-exempt mortgage lenders, brokers, and servicers must notify the Utah Department of Financial Institutions and pay a fee (Utah Code § 70D-2-201).

Two exemptions cover most sellers. A "casual lender" that makes fewer than five mortgage loans a year is exempt. So is a mortgage loan of two years or less (Utah Code § 70D-2-103).

The casual-lender line is close to the federal creditor line, but the two are not the same test. Utah's line is fewer than five a year. The federal creditor line is more than five in the current or preceding year. A seller who makes exactly five loans in a year can sit on different sides of the two tests. If you are anywhere near five, get advice before the fifth closing.

A related point concerns who collects the payments. Many sellers use a third-party servicer. Whether that servicer has its own registration duties is a question for the servicer, not you. For how servicing works day to day, see third-party note servicing in Utah.

Can I sell my seller-carry note later without a license?

Be careful here. Utah treats seller-carry notes as securities. Brokering or selling notes generally requires securities licensing, so plan any note sale with an attorney before you market it.

Many sellers carry a note planning to sell it later for cash. That is a legitimate plan. But the sale of the note is a separate transaction with separate rules. Seller-carry notes are securities, and offering or selling them generally requires broker-dealer or agent licensing (Utah Code § 61-1-13(1)(x)).

The risk runs mostly to the people in the middle. Someone who finds buyers for other people's notes, for a fee, is in licensed territory. As the note holder, keep your plan simple. Talk to an attorney before you list a note, pay a finder, or sell a partial interest.

Note buyers also discount heavily for weak paperwork. A note with a clear payment history, a recorded trust deed, and a servicer's records is easier to sell. The same records help you if the buyer ever defaults. For the tax and servicing side, see the servicing and taxes guide.

How do these rules apply to real Utah deals?

The pattern is consistent. Individuals with one property and a balloon usually fit the one-property exclusion. Entities or repeat sellers need a fully amortizing note under the three-property exclusion. Some deals fit neither and need restructuring before closing.

These examples use round numbers and simplified facts. Your facts will differ, so treat them as patterns, not answers.

Example 1: A retired couple sells one rental with a seven-year balloon. They own the Orem duplex personally. It is the only property they have financed in 12 months. They sell it for $450,000, take $90,000 down, and carry $360,000 at a fixed 7%, amortized over 30 years with a seven-year balloon. They did not build it. The one-property exclusion may fit, because it permits a balloon for natural persons (12 CFR § 1026.36(a)(5)). Utah's seller exemption also covers them (Utah Code § 61-2c-105(2)(i)).

Example 2: An LLC sells two houses and wants balloons on both. The LLC owns two Lehi houses and sells both this year. It carries two notes with five-year balloons. The one-property exclusion does not cover an LLC, and it would be two properties anyway. The three-property exclusion covers entities but bans balloons (12 CFR § 1026.36(a)(4)). Neither exclusion fits as structured. The fix is usually a fully amortizing note, a good-faith ability-to-repay file, and a fixed rate.

Example 3: An individual investor sells three houses with full amortization. She sells three Provo homes over 12 months. Each note is fully amortizing, fixed-rate, and backed by a documented ability-to-repay review. She did not build any of them. The three-property exclusion may fit (12 CFR § 1026.36(a)(4)). A fourth sale inside 12 months would take her past it.

Example 4: A seller who is close to the creditor line. A seller has made five dwelling-secured loans this year. A sixth would put him over the more-than-five threshold (12 CFR § 1026.2). At that point, Reg Z disclosures, ability-to-repay rules, and TRID come into play. This is the moment to stop and get advice, before the sixth closing.

A numbered decision checklist

Work through these in order. Write your answers down. The licensing checker walks through the same ground.

1. Who is the seller? An individual, an estate, a trust, or an entity like an LLC? Only the first three can use the one-property exclusion.
2. How many properties have you financed in the last 12 months, counting this one? One keeps both exclusions open. Two or three leaves only the three-property exclusion. Four or more leaves neither.
3. Do you own the property, and will it secure the note? Both exclusions require it.
4. Did you build the home? Builders cannot use either exclusion.
5. Does the note have a balloon? If yes, only the one-property exclusion can fit.
6. Is the rate fixed, or fixed for at least five years with caps? Both exclusions require one of those.
7. Have you documented the buyer's ability to repay? Required for the three-property exclusion. Good practice for any seller.
8. How many dwelling-secured loans did you make this year and last year? More than five in either year can make you a TILA creditor.
9. Are you the seller taking back a trust deed? If so, Utah's 61-2c seller exemption likely applies.
10. Do you make fewer than five mortgage loans a year? If so, Utah's 70D casual-lender exemption likely applies.
11. Do you plan to sell the note later? If so, plan around Utah securities rules first.

If every answer lines up, you likely fit an exclusion. If one answer doesn't, change the structure before closing, not after. The flat fee of $750 covers drafting a note and trust deed for your terms. See what the flat fee includes.

What Greg would tell you

Before we talk about licensing, I want to know three things: who is selling, how many properties you have financed this year, and whether the note has a balloon. Most of the time the answer is clean, and we can build the note to fit the exclusion. When it isn't, it is far easier to fix the terms before closing than to explain them afterward.

Frequently asked questions

How many properties can I seller-finance per year before Dodd-Frank applies?

Reg Z's seller exclusions stop at one property for a balloon note and three for a fully amortizing note. The one-property exclusion covers one property in any 12 months, for a natural person, estate, or trust. The three-property exclusion covers up to three in 12 months, with no balloon and a good-faith ability-to-repay check. Separately, more than five dwelling-secured loans in the current or preceding calendar year can make you a TILA creditor.

Can I include a balloon payment in a Utah seller-financed note?

Yes, if you fit the one-property exclusion, a balloon is permitted. That exclusion covers a natural person, estate, or trust financing one property in 12 months, with no negative amortization. The three-property exclusion does not allow a balloon. An LLC selling one house therefore cannot use a balloon and stay inside either exclusion.

Do I have to be a licensed mortgage lender to seller-finance in Utah?

Usually not, if you are the seller taking back a trust deed on the property you sold. Utah's 61-2c act exempts a seller who receives a trust deed as security for a separate money obligation, with no numeric cap. Federal rules still apply on their own terms, so check the Reg Z exclusions too.

Does my LLC get the same treatment as me personally?

Not under Reg Z's one-property exclusion, which covers only natural persons, estates, and trusts. An LLC can use the three-property exclusion, but only with a fully amortizing note and a good-faith ability-to-repay determination. Utah's 61-2c seller exemption covers an individual or an entity.

Can I sell my seller-carry note to an investor later?

You can, but Utah treats seller-carry notes as securities. Brokering or selling notes generally requires securities licensing, so talk to an attorney before you market a note or pay anyone to find a buyer for it.

This site is for general information about Utah law and is not legal advice. Using it does not create an attorney-client relationship. Every transaction is different — talk to an attorney about yours. Attorney advertising.

Related reading · Licensing & Dodd-Frank

• 01

  Balloon Payments in Utah Seller Financing: What Dodd-Frank Allows

  When a Utah seller can put a balloon in a seller-financed note under the Dodd-Frank one-property and three-property exclusions, with worked 5- and 7-year numbers.
• 02

  A Wholesaler Pitched You a Sub-To. Read This First.

  A calm, seller-side checklist for Utah homeowners offered a subject-to deal: the due-on-sale clause, your credit, and what to ask before you sign.
• 03

  Can I Seller-Finance My Utah Home If I Still Have a Mortgage?

  Yes, through a wrap or all-inclusive trust deed, but the due-on-sale clause stays with you. The risks, the math, and the safeguards, from a Utah attorney with a flat fee.

Primary sources

• 12 CFR § 1026.36(a)(4)
• 12 CFR § 1026.36(a)(5)
• 12 CFR § 1026.36
• 12 CFR § 1026.2
• 12 CFR § 1026.43
• 12 CFR § 1026.2; CFPB TILA-RESPA fact sheet
• 12 CFR § 1024.2(b)
• 12 CFR § 1008.103
• 12 CFR Part 1008, Appendix A
• Utah Code § 61-2c-105(2)(i)
• Utah Code § 61-2c-105(2)(h)
• Utah Code § 61-2c-102
• Utah Code § 70D-2-103
• Utah Code § 70D-2-201
• Utah Code § 61-1-13(1)(x)