Private Lending Restrictions in Maryland

[Chris Troutner]

I have a private lender lined up for a flip in Hagerstown, MD.  Was going to do a Promissory Note secured by a mortgage. Since all of my investing has been outside the state of MD, I wanted to have a local attorney review the Note. He is telling me MD has some restrictions on private lenders, i.e. once a mortgage is introduced the lender has to be licensed. Is this true? Not that I doubt the attorney, I just can't believe MD is so restrictive.

[Stephanie P.]

@Chris Troutner

Just to clarify, the CFPB Laws and Regulations book, RESPA chapter says:

Exemptions–12CFR1024.5(b)

The following transactions are exempt from coverage:

A loan primarily for business, commercial or agricultural purposes (definition identical to Regulation Z, 12CFR1026.3(a)(1))

Essentially if your loan is for business purposes, it's exempt from RESPA and not considered a "covered loan" and solidifies your private lender from having to be licensed.  It's not a Maryland thing, it's federal although some states have decided to take it further and require licensing, Maryland has not.

Hope that helps

Stephanie