As the owner of residential real estate in Texas, do you make seller financed loans?
If so, you need to know about a new Texas law that may affect you.
Updated new rule provisions for Texas Finance Code § 156.202(a-1)(3), which became effective January 2026, now require an owner of residential real estate to obtain a mortgage company license if he or she makes more than three seller-financed loans in a 12-month period.
Who is considered an “owner of residential real estate” in this statute?
The law refers to natural persons owning property as well as affiliated owners (referring to the situation in which two or more owners are treated as a single person for counting purposes). This rule means transactions through affiliated LLCs or entities can count together toward the three-loan exemption threshold.
If you make more than three loans in a 12-month period, you can no longer merely use a licensed RMLO to facilitate additional deals because you are considered to be engaging in the business of a residential mortgage loan company.
The statute regulates who is making the loan, not just who prepares the paperwork.
What about wrap mortgage loans?
While the law is similar, wraps are addressed separately under Finance Code Chapter 159. To originate wrap mortgage loans, you must be licensed or registered unless you make only up to three wrap loans in a 12-month period.
Do you also need an RMLO license?
If you personally perform RMLO functions, such as taking a residential mortgage loan application or offering or negotiating residential mortgage loan terms for compensation or gain, then you would also need an RMLO license.
There are options if investors want to do more than three real estate deals in 12 months.
One option is to create a licensed mortgage company by obtaining a Chapter 156 license, then designate a licensed RMLO.
The easier second option is to use a third-party licensed lender. In this case, you (the investor) sell the property, but the buyer must use a licensed mortgage company for financing.
Enforcement and penalties are tough.
Acting as an RMLO without the required license, making more than three loans in a 12-month period, or engaging in non-exempt originator activities without proper licensing can lead to criminal penalties, fines and damages, and administrative discipline from regulators.
Legal advice is a good idea.
The Lonergan Law Firm PLLC is an investor-focused real estate law firm, led by a Dallas-based real estate attorney who is Board Certified in residential and commercial real estate. We provide personalized, hands-on legal counsel for all your real estate needs.
Getting professional advice can help you make the best decisions to move your business forward. Scheduling a legal consultation may be your best next step.
Gaylene Rogers Lonergan
Board Certified Residential and Commercial Real Estate Attorney
Lonergan Law Firm PLLC and Title Closing Office
12801 North Central Expressway, Suite 150, Dallas, Texas 75243
214-503-7509 | lonerganlaw.com
The Lonergan Law Firm PLLC | Founded 2000 | Ongoing legal and title practice
© Gaylene Rogers Lonergan and Lonergan Law Firm, PLLC, 2026. All rights reserved. This article is provided for educational reasons exclusively and is not meant to be construed as legal advice. The Lonergan Law Firm, PLLC, will represent you only after being retained and that agreement is made in writing.
