A mortgage company operates as a sole proprietorship. The owner's personal residence is valued at $400,000 with a $250,000 mortgage. Can this equity be counted toward the company's net worth requirement?
Correct Answer
C) No, personal residence equity cannot be counted
Under SAFE Act regulations, net worth requirements for mortgage companies must be calculated using business assets only. Personal residence equity, even in a sole proprietorship, cannot be counted toward the company's regulatory net worth requirement as it is considered a personal asset exempt from business creditors.
Why This Is the Correct Answer
Under SAFE Act regulations, net worth requirements for mortgage companies must be calculated using business assets only. Personal residence equity, even in a sole proprietorship, cannot be counted toward the company's regulatory net worth requirement as it is considered a personal asset exempt from business creditors.
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