Individual doing hard money lending in California

4 Replies

Hi, I'm in the process of obtaining my CA Broker's License to start my hard money lending business, but I have not yet gotten it. I have a contact in CA and he is a flipper (with his own LLC) that needs money to finance a property that he will soon be in contract for. This is going to be a traditional hard money loan:

I'm using my own capital from my own bank accounts - no brokering involved.
The interest rate will be above 10% on an interest only loan.
I have not made any other loans this year.
It will NOT be for personal, family, household, or residence use. It is purely commercial and business purpose.
This will be a loan secured by first deed of trust.

Can I make this loan as an individual w/o a broker's license? I am not considered to be in the business of making loans - I have a different job. Can I charge points or loan service fees or can I only receive interest as compensation?

Thanks in advance for the answers!

What do your course materials say? :) My understanding is that trust deed lending at above 10% in CA that has to be originated by a licensed mortgage broker. Everyone I know lending at hard money rates is either a broker or is having brokers place their money. I have no desire to be an agent but I have considered becoming a licensed mortgage broker, for just the kind of loan you are considering.

@Lupe Santiago , to originate loans with interest above 10% requires a license in CA. Also, beginning Jan 1, 2013, if you want to waive the 2 year salesperson experience requirement before getting the broker's license, you need a 4 year college degree with major or minor in real estate ... used to be any major would qualify you for the waiver. Here's the link:

Lupe, you may be interested in obtaining a CFL Company License as opposed to the DRE License. Keep in mind that you cannot license an LLC with the DRE (now referred to as the BRE). Only corporation may obtain the company license.

A CFL License can be obtained to include commercial or residential loans. The biggest difference is that if you are brokering a CFL loan, you may only broker it to a CFL licensed lender. If you are involved in residential loans, you will want to obtain the NMLS endorsement for the CFL license for both your company and for any individual originator as an MLO. The MLO requires 20 hours or pre-licensing NMLS approved education and just must pass the National component NMLS exam and currently (Nov 2013) the California NMLS exam as well.


Mike Crouse

Also, CFL licensed lenders/brokers are exempt from the usury laws.

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