"Lenders License" requirement for NPN mods?

11 Replies

I'm working with a company who may raise some capital for my llc and they said that I may need a "lenders license" if I (my llc) modifies a preexisting loan. I've never heard of this, but thought I'd post here to get a reality check. Anyone ever heard of this and if so would it apply in our arena?

Thanks

Medium rcm circleBob Malecki, Resolution Capital Management | 360.850.1252 | http://www.rcm.company | Podcast Guest on Show #211

If you are the owner of the loan you do need a license to modify your loan.  You need a license to work between a Borrower and Mortgagee where you are neither party and plan on collecting a fee.

Originally posted by @Jim Farrell:

@Dion DePaoli  , is this something a servicer could handle?

 That is my understanding that my servicer's license is what would qualify, but if anyone can provide any further info or a link to an article, it is appreciated.

Medium rcm circleBob Malecki, Resolution Capital Management | 360.850.1252 | http://www.rcm.company | Podcast Guest on Show #211

We use the servicer to negotiate and complete the forbearance and/or mod. There are more states requiring Debt Buyers licenses too. Georgia is always fun: 

"This application is to be completed and filed by each applicant, regardless of whether it is organized as a company or sole proprietorship, for a license or registration to engage in a mortgage business as a lender pursuant to the Georgia Residential Mortgage Act. A mortgage lender means any person who directly or indirectly makes, originates, or purchases mortgage loans or who services mortgage loans."

the above is off the NMLS web site  if you would like to check each state before you buy a NPN.

Tiger M., Tradewind Investments Real Estate and Property Management | 702‑870‑5500 | http://tradewindpropertymanagement.com

For Georgia, digging deeper at  http://mortgage.nationwidelicensingsystem.org/slr/PublishedStateDocuments/GA-Mtg-Lender-License-Description.pdf

Who does not need this license?

Full information regarding exemptions provided for under the Georgia Residential Mortgage Act in Code

Section 7-1-1001 is on the web under

Medium rcm circleBob Malecki, Resolution Capital Management | 360.850.1252 | http://www.rcm.company | Podcast Guest on Show #211

Makes...is different than purchases.

Can a Mortgage Servicer conduct a modification?  
Yes.  Employees working that area in the Servicer have their RMLO license.

Does Mortgagee need a license to negotiate new terms on a loan they own with that loan's Borrower?  No.  The Mortgagee is an interested party already.  

In general, any time a 3rd party takes application or negotiates terms between a consumer/borrower and a Lender with the expectation of a fee or gain, a license is required.  To some degree, under that same idea is why the employee of a licensed Mortgage Servicer company needs to be licensed in order to do that work inside their four walls.  The Mortgage Servicer is not an interested party being neither the Borrower or Mortgagee.  

A Mortgagee, along with the Borrower, are interested parties.  In Bob's case he is not "Lending" the loan is already originated and he invested into it.  A Mortgagee is allowed to talk to their Borrower and the Borrower to their Mortgagee about matters of repayment, since that is really the fundamental of their relationship.  

In terms of references - any state or the particular state of the subject property you will find the rules around mortgage license which will include that state's version of SAFE Act.  The answers you seek are there.

This idea that floats around that somehow you (anyone) is covered by someone else's license simply is not true.  It's not true anywhere licenses are involved for anything.  In general, a license is issued to a Mortgage Servicer to service loans in a third party capacity.  If the Mortgage Service directly invested in the loans and was the Mortgagee, their license is not required, its for the loans they do not own that a license is required.  

Until SAFE Act, employees (W-2) were presumed to be under that license.  SAFE Act said now the employees need licenses too.  Just like with bank RMLOs.  As an Investor who boards a loan with a Mortgage Servicer you are neither the Mortgage Servicer nor an employee under their direct supervision.  So there is no "coverage" from the Mortgage Servicer license to you.  You are simply hiring an agent (Mortgage Servicer) to do the work (Service the loan) and as such that party needs to have a license to do that for you.  An employee of the Mortgagee would not need a license either.  (Employee = W-2 not 1099)  An example would be akin to your neighbor having a real estate broker license and you doing "some" deals under the license.  You "covered" by his license, you need your own.   

I think the notion of being "under" their license has come up from general conversations of investor using some limited service Mortgage Servicers and talking to others about investing in the asset class.  I think is an exaggeration due to the casual conversation and the listener walks away thinking the wrong thing.  

Hope that helps.



@Dion DePaoli  , what about a person servicing a note owned by their self directed iRA? Is that still allowed without a license?

Originally posted by @Paul Murch:

@Dion DePaoli , what about a person servicing a note owned by their self directed iRA? Is that still allowed without a license?

If it's owned by you, which is the case with the IRA then you are fine.