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Forums » Bankers, Lenders, and Mortgage Brokers » Do I need a license to broker private/hard money loans?

Do I need a license to broker private/hard money loans?

35 posts by 25 users


I heard that there is no license needed to broker private/ hard money loans, Is there any truth to this? I know that you don't need one in the commercial sector. Is there one needed in the residential hard mney sector?


Hard money can fall in the gray. The answer will also vary by the state.

If you lend to a business who fixes up a residential property then it is many times completely valid to consider the loan a commercial loan. That means the commercial loan rules could apply.

If you lend hard money to an owner occupant for their primary residence you are definitely in the residential space and need to be licensed plus follow all the regulations.

Most hard money lenders will not lend on residential property that will be owner occupied. That should give you a clue as to what most HML think about the residential loan market and the regulations.

John Corey

Real Estate Investor · Denver, Colorado

100% Dependent on your local gov. In Colorado, you must be licensed

Real Estate Investor · Rochester Hills, Michigan

Hey Chris - you wouldn't happen to be digging up posts form 2007 to help get backlinks to your site would you?

Private Money Lender · Cincinnati, Ohio

you are correct, but getting a LO Lic will help.

Real Estate Investor · Georgia

It depends.

Homeowner · Calabasas, California

If you don't have one and things go the wrong direction it can be an most states anyhow.

Hard Money Lender · bronx, New York

I would start by calling your local state banking dept. in your areas that issue licenses for mortgage brokers, lenders, etcc when ask them whom else should you check with to make sure the feds won't be breathing down your back as well, if you are ok and do not need one with the state.

Real Estate Investor · Phoenix, Arizona

The new SAFE Act made all these answers obsolete. You can do up to 5 loans per year without a license ... after that you need to place it through a licensed lender or become one.

Hard Money Lender · Dallas, Texas

In Texas you MUST be licensed to originate ANY 1-4 family residential loan.

Good Luck!

Real Estate Investor · Amarillo, Texas

Originally posted by Rob Barney:
In Texas you MUST be licensed to originate ANY 1-4 family residential loan.

Good Luck!

Although it was already said, this post is way old and the poster probablly doesnt care anymore, as Ron pointed out, you can create up to 5 loans per year WITHOUT a license, this includes TEXAS, once you hit your 5th loan you now need a license.

Real Estate Investor · Studio City, California

It seems to me that it is all depends on who's money is it. If this is your own private money I don't see any reason why wouldn't you be able to lend it to whomever you chose without a license and as long as you disclose the terms of the loan up-front. If this is investment money that you lend to others, i.e. other people's money, the license requirement would make sense.

Real Estate Investor · Amarillo, Texas

Im not sure the bout everywhere, but in Texas there was a law effective sept 1, 2007 (156.201 License Required) stating that you need to told a brokers license in order to create 5 loans or more, this includes owner financing and hard money loans
There are some exemptions (156.202) which state an individual who makes a mortgage loan from the individuals own funds. ,
also talks about one who does not regularly engage in the business of making or brokering mortgage loans
one of our recent REIA's we had a lawyer discussing this, and he kept mentioning how theres alot of gray area, and there has not been any cases where this was brought to court,
My undestanding is, if your owner financing the properties, you'd be regularly engaging in the business and could be found guilty. the lawyer wasnt even sure. just dont get caught.
Only way I could see this being bad is if you owner financed 6 or more, and then went to forclose, but the lendee would have to know about this law, and most investors dont even know about this

There was lots of discussion about getting around this, and creating multiple LLC's and such to advoid getting in trouble, but im not sure, there was never a definant answer.

Real Estate Investor · Springfield, Missouri

Glad that's cleared up! I'm wondering who is going to be teaching the 6 hours of instruction for loan originators. To HUD a non-conforming loan is one that doesn't meet secondary requirements, has a thirty year amoritization, no balloon payment prior to half the equity being paid down and is fully amortized. I'm afraid that people will be doing sale contracts with a expiration date and the sale contract can be made again if an additional deposit to the purchase price is made. That, or they are going to finance an option contract and never secure it with the property. I might even lower the price a house if the buyer likes one of my paintings, yes, I paint, and they are very expensives, so expensive, to sell one to most people I'd have to finance it!
Alot of what this is about is not a safeguard for consumers as claimed, in my opinion, but a way to make it very hard for the small mortgage broker to survive. If you read the SAFE Act, you'll see that regulators can come in an examine the broker's business. Having been a bank examiner with FDIC, I can tell you that examinations are very expensive. Paying for the exam is put on the party being examined! In addition to that, brokers will have a loan report, like a bank call report which is more time consuming than a tax return. In a bank, only employees and officers with knowledge in preparing the call report may complete the requirement. Another expense. It's really about banks getting rid of some thorns in the side and reducing seller financing. Why, banks want real skin in the game, real equity for a 75% LTV loan, to date, a soft second filled the gap allowing a borrower to get in under the rules, but was more likely to walk away. OK, get a mortgage broker to "originate" the loan for you. Let's look at that. Who says what's in the loan terms, after you pass your mark, if you are not a licensened originator, you're not to discuss loan terms, sounds like it's a take it or leave deal, if you can find a broker in your area willing to do it. You think it will be expensive, you bet it will be, the broker has a liability in your deal now, until it's fully paid! Just wait for a borrower to cry foul. Banks can not assist in underwriting a private loan, for that very reason and they are not a party to the transaction. Wait til you hear your local Habitat For Humanity start crying over this on the 5th house they build and sell! Non-profits are not exempt! That goes for neighborhood assistant programs too!
So, do you need a license? I think you do if you're going to do any business, The SAFE Act is some smoke screen and it's like swating flies with a sledge hammer! Bill

PS. I may lend my talents to lending assistance in providing alternatives to this for the fun of it! HUD is like turning a battleship when I'm bouncing along on a jetski! Been there, done that!

Financexaminer@real estate investor dot com

Hard Money Lender · Dallas, Texas

Originally posted by Scott Ricenbaw:
Originally posted by Rob Barney:
In Texas you MUST be licensed to originate ANY 1-4 family residential loan.

Good Luck!

Although it was already said, this post is way old and the poster probablly doesnt care anymore, as Ron pointed out, you can create up to 5 loans per year WITHOUT a license, this includes TEXAS, once you hit your 5th loan you now need a license.

I don't want to get into a dispute...However...You may be able to create up to five per year of your OWN notes. But as of 9/2008, to ORIGINATE any loan in which you are not the seller of the property securing the loan, you MUST be licensed.

Real Estate Investor · Studio City, California

Ok, So here is a question since we are on the subject. If my company hold several properties. Can I, as an individual or through another entity, can make a loan financing those properties without having a license?
Another word, I'm the sole proprietary owner of a company that own several properties (All free and clear). Can I finance (i.e. record a loan) those property either myself or through another sole proprietary entity?


Real Estate Investor · Amarillo, Texas

Would like more info on this if you have it please, attorneys here seem to be behind on this topic.. I was under the impression that hard money lenders did not need to be licensed as long as they did under 5 per year, one way that was discussed getting around that would be doing 5 per year per LLC, and HOPEFULLY never getting caught.. but im pretty sure most HML are gonna do more then 5 per year!

Hard Money Lender · Dallas, Texas


Consult with a Board Certified Real Estate Attorney such as Gaylene Lonergan with or call the Texas Savings and Loan Dept. I am 100% sure about the licensing requirements for HMLs in TX.

Good luck!

Homeowner · harrisville, OH

I am in ohio looking to get hard money private loan to get two homes going

Real Estate Investor · Phoenix, Arizona

Back to the original thread on licensing ...

The documentation on the new SAFE act is pretty good (rare but true). If you read the text related to "Loan Originators" (LO) it says when required (e.g. brokering) and when not needed (fewer than 5 loans/yr using own money unless handled by licensed LO).

NOTE: having a license is necessary in these cases, but NOT sufficient. You need to hang your license with a Mortgage Broker or Mortgage Banker ... or get that license too.

State laws can be stricter ... so they have a link to the state regulations.

Don't you love it ... the banks aren't lending ... and Govt. complicates life for private lenders!

Even though LO's (like me) are registered nationally, we need to have a license in each state we lend.

NOTE: request for loans should go to the separate subgroup on private lending

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