States Required to hold NMLS to originate REI Loan

Commercial Real Estate Investing
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States Required to hold NMLS to originate REI Loan

S Cutsail
Rental Property Investor · Pasadena, MD · Member since 2019 · 42 posts · 3 votes

I have not yet been able to get a definitive answer as to what states require a Commercial Broker to carry a broker license to get funding private or hard money for non owner occupied real estate investment properties. Can someone please point me in the right direction and the NMLS is not the place to find this information. I would really appreciate any feedback on this. I have been reaching out to private lender's and they do not require me to have a license even in certain states that require a NMLS to originate the loan as a Commercial Broker. 

Someone please help me because it seems like NO one really knows what those states are that require a license even people that have been doing this for 25 yr+. 


All feedback is welcome as long as it's backed by more then just an opinion. I'm looking for facts. Thanks.

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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
6y

@S Cutsail.

In eight states, those wishing to originate commercial mortgage loans must adhere to rules which govern mortgage loan originators and brokers. This means individuals must obtain individual licenses, and their employers must hold state mortgage broker permits. These states are: Arizona, Arkansas, Florida, Maryland, Nevada, North Dakota, South Dakota and Wisconsin

three states do not require mortgage brokerage licensing to originate commercial real estate loans. However, originators of such financial transactions in California, New Jersey and New York must be licensed real estate agents, and work for firms owned by individuals who hold valid real estate broker licenses.

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  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    6y

    @S Cutsail.

    In eight states, those wishing to originate commercial mortgage loans must adhere to rules which govern mortgage loan originators and brokers. This means individuals must obtain individual licenses, and their employers must hold state mortgage broker permits. These states are: Arizona, Arkansas, Florida, Maryland, Nevada, North Dakota, South Dakota and Wisconsin

    three states do not require mortgage brokerage licensing to originate commercial real estate loans. However, originators of such financial transactions in California, New Jersey and New York must be licensed real estate agents, and work for firms owned by individuals who hold valid real estate broker licenses.

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  • S Cutsail
    OP
    Rental Property Investor · Pasadena, MD · Member since 2019 · 42 posts · 3 votes
    6y

    Don,

    Thanks for the response it is very much appreciated. Just to clarify what you have written. 

    From what I gather you are stating that Arizona, Arkansas, Florida, Maryland, Nevada, North Dakota, South Dakota and Wisconsin require a license to originate Commercial loans correct?

    Is this accurate (Loan origination is the process by which a borrower applies for a new loan, and a lender processes that application). 

    What if the Commercial Broker gathers an initial application for purposes to send it to the lender who is handling the loan origination piece, who carries and holds all the license in those state's. Is that perfectly legal?

    Secondly, what three states do not require brokerage licensing to originate commercial real estate loans?

    Thirdly, to clarify your answer about "originators of such financial transactions in California, New Jersey and New York must be licensed real estate agent" and work under a real estate broker. 

    What if they are working under a loan broker in those 3 states. Do they need to work as a real estate agent under a real estate broker at that point to conduct those commercial types of financial transactions?

    Thank you Don for your response once again. Hope you enjoy the rest of your Sunday. 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y

    When you talk about commercial loans your talking about 5 units or more non owner occ correct ?  

    If your planning on doing 1 to 4 unit non owner ( commercial loans) there are a few more states that require the license to Add to Dons list..  Oregon being one of them.

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  • S Cutsail
    OP
    Rental Property Investor · Pasadena, MD · Member since 2019 · 42 posts · 3 votes
    6y

    Jay thanks for the response. What are the other few states that require license for 1003 1-4 unit's. 

    0Reply
  • S Cutsail
    OP
    Rental Property Investor · Pasadena, MD · Member since 2019 · 42 posts · 3 votes
    6y

    Jay all non owner occupied real estate investment projects.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @S Cutsail:

    Jay all non owner occupied real estate investment projects.

    any one to four unit projects.. those are were the license comes into effect in certain states.. I think there are twelve that require it for those.  but like Don said above in Oregon you need one for 1 to 4.. but 5 or more or industrial strip centers land  new construction all those are exempt.. its just the 1 to 4  no matter owner occ or investor.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @S Cutsail:

    Jay thanks for the response. What are the other few states that require license for 1003 1-4 unit's. 

    Just google it.. should be there.

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  • S Cutsail
    OP
    Rental Property Investor · Pasadena, MD · Member since 2019 · 42 posts · 3 votes
    6y

    Jay you see how I am confused I have been talking to people in my community and everyone of them have different answers to these questions. Most of them have extensive experience 20+ yrs in the Commercial Lending industry here in Maryland. I talked to a guy that has been a Commercial Lender here in Maryland and he told me there is no license requirement. He has been doing something right for 20 years. I'm just getting mixed answers as to all of my questions. Don answer is the most helpful thus far. 

    Thank you Jay for your input and quick response time.

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  • Account Closed
    Member since 2020 · 17 posts · 36 votes
    6y

    @S Cutsail my suggestion is to just get the license. Study for it and pass the test. Even if you don’t legally need the license, nothing wrong with CYA

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @S Cutsail:

    Jay you see how I am confused I have been talking to people in my community and everyone of them have different answers to these questions. Most of them have extensive experience 20+ yrs in the Commercial Lending industry here in Maryland. I talked to a guy that has been a Commercial Lender here in Maryland and he told me there is no license requirement. He has been doing something right for 20 years. I'm just getting mixed answers as to all of my questions. Don answer is the most helpful thus far. 

    Thank you Jay for your input and quick response time. 

    well one thing U can do for sure to rest your mind.. is simply check in with the state regulators in whatever state you want to do business in describe what kind of loans your going to be doing and if a license is required..  

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Account Closed:

    @S Cutsail my suggestion is to just get the license. Study for it and pass the test. Even if you don’t legally need the license, nothing wrong with CYA

    RMLO  and NMLS registration are a little tougher than your average license test  like the real estate brokers test etc.

    you have to do FBI background you have to submit financial statement..  And if you never did residential owner occ lending the test can be pretty hard as its 80% geared toward that part of the industry.. Then I think unless you qualify as a mortgage banker I think you have to work for someone.. 

    I agree on the Real estate license end of it.. those are pretty easy to get. 

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  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    6y

    @S Cutsail

    To originate, or to broker commercial real estate loans, eight states I mentioned above require a mortgage brokers, or commercial mortgage brokers license. Three states require a real estate brokers license, again mentioned above. 39 states do not require licensing. There is no licensing required on the Federal level. Commercial real estate is defined as any real property not residential, and any residential property of 5 or more units.

    Residential investment properties (1-4 unit NOT owner occupied) a few of the 39 states that do not require licensing for commercial loan brokering do require licensing for non owner occupied residential, Oregon being one of them.

    The distinction between mortgage “originator” and “mortgage broker” is primarily made at the Federal level in regards to compliance with the SAFE act. It doesn’t typically carryover to the state regulation of commercial mortgage activity. At this level you’re simply either a broker or a lender.

    Every state that regulates and requires licensing for commercial mortgage loans (the 14 states mentioned previously) have exceptions imbedded in their regulations, typically for doing 1-3 loans per 12 month period in that state. So if we, as nationwide direct commercial mortgage lenders, do two loans in Arizona, we will fall under the 3 loan per 12 month period exemption. If we were to make more than three loans per 12 month period secured by properties in AZ then either we would need to hold an Arizona commercial mortgage brokers license, or we would have to make the loan through someone licensed as a commercial mortgage broker by the state of Arizona.

    Any more detailed or technical questions would probably have to be answered by legal counsel knowledgeable in regulatory licensing in the state in question, or the state licensing board itself.

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