From the BiggerPockets Blog

 BiggerPockets Blog »

Jump to Forum View All

Click a category below to view different forum categories.

BiggerPockets

General Info

BiggerPockets Q&A, Site Questions, & Announcements

1523 topics, 14441 posts — Last Post 04/24/14, 11:47AM

BiggerPockets Exclusive PRO Area

117 topics, 841 posts — Last Post 04/23/14, 08:28AM

New Member Introductions

10991 topics, 86626 posts — Last Post 04/24/14, 11:48AM

Real Estate Success Stories

399 topics, 6215 posts — Last Post 04/24/14, 08:56AM

General Real Estate

General Real Estate

Buying & Selling Real Estate

5997 topics, 47260 posts — Last Post 04/24/14, 11:47AM

Renters

651 topics, 5869 posts — Last Post 04/24/14, 11:50AM

Get Foreclosure Help - Help Stop Foreclosure Forum

317 topics, 2561 posts — Last Post 04/23/14, 08:28PM

Home Owner Association (HOA) Issues & Problems Forum

238 topics, 1611 posts — Last Post 04/23/14, 04:02AM

Do it Yourself

659 topics, 6323 posts — Last Post 04/24/14, 09:58AM

Reviews & Feedback

Real Estate Deal Analysis and Advice

3714 topics, 29782 posts — Last Post 04/24/14, 11:24AM

Real Estate Guru, Book & Course Reviews and Discussions

1139 topics, 11609 posts — Last Post 04/24/14, 10:32AM

Ask About A Real Estate Company

743 topics, 7344 posts — Last Post 04/22/14, 11:25PM

Real Estate Investing

Real Estate Strategies

Wholesaling

5640 topics, 43978 posts — Last Post 04/24/14, 11:25AM

Rehabbing and House Flipping

3354 topics, 31109 posts — Last Post 04/24/14, 07:10AM

Real Estate Development & New Home Construction

554 topics, 4695 posts — Last Post 04/24/14, 06:22AM

Innovative Strategies

705 topics, 6044 posts — Last Post 04/22/14, 04:06PM

Tax Liens, Notes, Paper, & Cash Flows Discussion

868 topics, 6696 posts — Last Post 04/24/14, 11:40AM

Rent to Own a.k.a. Lease Purchase, Lease Options

700 topics, 4961 posts — Last Post 04/24/14, 11:26AM

1031 Exchanges

143 topics, 1063 posts — Last Post 04/24/14, 11:10AM

Foreclosure Investing

General Foreclosure & Pre-Foreclosure Forums

1692 topics, 11317 posts — Last Post 04/22/14, 09:26PM

HUD, VA, and Tax Sales

416 topics, 3103 posts — Last Post 04/23/14, 02:29PM

REOs

1217 topics, 10604 posts — Last Post 04/24/14, 07:13AM

Short Sales

1539 topics, 13154 posts — Last Post 04/23/14, 08:25PM

Landlord & Tenant Forums

Landlord & Rental Property Questions

7254 topics, 71226 posts — Last Post 04/24/14, 10:51AM

Mobile Homes & Mobile Home Park Investing

639 topics, 5146 posts — Last Post 04/24/14, 05:13AM

Investor Basics

Starting Out

7735 topics, 60700 posts — Last Post 04/24/14, 11:31AM

Investor Psychology

432 topics, 6111 posts — Last Post 04/24/14, 08:55AM

General Real Estate Investing

4730 topics, 37330 posts — Last Post 04/24/14, 10:47AM

Real Estate Investor Marketing

1740 topics, 14163 posts — Last Post 04/24/14, 08:42AM

Commercial Real Estate

Commercial Real Estate Investing Forum

1413 topics, 9015 posts — Last Post 04/24/14, 10:58AM

Multi-Family and Apartment Investing

1123 topics, 9399 posts — Last Post 04/24/14, 10:57AM

The Business of Real Estate

Real Estate Technology and the Internet

Real Estate Technology, Social Media & Blogging

645 topics, 4913 posts — Last Post 04/24/14, 05:42AM

Business Basics

Goals, Business Plans & Entities

835 topics, 7593 posts — Last Post 04/24/14, 10:32AM

Real Estate Finance & Legal

Financial, Tax, and Legal

Tax, Legal Issues, Contracts, Self-Directed IRA

2803 topics, 20138 posts — Last Post 04/24/14, 08:22AM

Property Insurance

312 topics, 2059 posts — Last Post 04/24/14, 10:22AM

Personal Finance Discussion

330 topics, 2754 posts — Last Post 04/22/14, 12:06PM

Loans, Mortgages, Credit Lines

Private & Conventional Lending Discussion

2853 topics, 19853 posts — Last Post 04/24/14, 11:40AM

Creative Real Estate Financing

1221 topics, 8863 posts — Last Post 04/24/14, 11:42AM

Crowdfunding Real Estate

35 topics, 463 posts — Last Post 04/19/14, 06:24PM

Real Estate Professionals

Real Estate Professionals

Real Estate Agents

1218 topics, 8043 posts — Last Post 04/24/14, 11:46AM

Bankers, Lenders, and Mortgage Brokers

442 topics, 1931 posts — Last Post 04/23/14, 09:04PM

Contractors

269 topics, 1690 posts — Last Post 04/22/14, 07:33AM

Local Real Estate

Local Real Estate

Local Real Estate Networking & Recommendations

2018 topics, 11761 posts — Last Post 04/24/14, 10:05AM

Americans & International Real Estate

162 topics, 572 posts — Last Post 04/24/14, 03:31AM

Foreigners Buying in the USA

62 topics, 409 posts — Last Post 04/10/14, 06:27AM

Canadian Real Estate

66 topics, 440 posts — Last Post 04/24/14, 05:54AM

Marketplace

Real Estate Marketplace

Real Estate Marketplace

15090 topics, 54147 posts — Last Post 04/24/14, 11:08AM

Real Estate Events and Happenings

168 topics, 2609 posts — Last Post 04/24/14, 11:03AM

Off-Topic

Off Topic

Off-Topic

2907 topics, 32447 posts — Last Post 04/24/14, 07:23AM

Housing News & Real Estate Market

921 topics, 8393 posts — Last Post 04/24/14, 11:45AM

BiggerPockets Real Estate Investing Summit

97 topics, 1752 posts — Last Post 04/23/14, 04:51AM

BiggerPockets Resources

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

Signup


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?




Maybe.

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 issue...in 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?

Anyone?



Real Estate Investor · Amarillo, Texas


Rob-
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


Scott,

Consult with a Board Certified Real Estate Attorney such as Gaylene Lonergan with http://www.lonerganlaw.com/ or call the Texas Savings and Loan Dept. http://www.sml.state.tx.us/index.html I am 100% sure about the licensing requirements for HMLs in TX.

Good luck!
Rob



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





Sign up