Those of you holding notes through entities, do you register the corp in each state that you hold a note in? I'm of the view that the business is trading notes and the location of the underlying asset is incidental to the business. On the other hand, I'd hate to lose a note's security if a judge found that the Corp was not holding a valid note because holding a note secured by an asset in state X represented doing business in that state.
For those inclined to suggest, "just register, what's the harm?" - in my instance, its roughly a thousand dollars per state, with ongoing attorney for service fees and tax implications and I need to identify the physical business premises, which does not exist as - in my view at least - I'm not actually doing any business there.
A good example of point I think, if I make a car loan and sell that note, that car owner goes to college out of state, is the person who bought my original loan now required to register in the new state? If not, why would mortgages be different?
My servicer is registered in each state that my LLC has notes.
Bob is correct here. You should ensure your notes are boarded with a servicer licensed in the state where the property is. Beyond that, you may need to register if you are pursuing a foreclosure. Ohio is an example, and the only one I have run into so far with this requirement. The cost for the registration in Ohio is $125, but no need to do it unless you need to foreclose there.
Thanks both of you. My servicer is registered but not my corp, which makes sense in my mind given I passively invest and they do business. I get some peace of mind that you have come to the same conclusions.
If I may, I want to be sure I understand. Even if your servicer is registered in the state (Ohio was the example) my entity must also register if I am to pursue a FC?
If my understanding is correct, may I ask where/how you learned this information? I have no problem with reading and researching, but state laws and regulations are SO fragmented and voluminous, that I'd REALLY appreciate a "go look in the south forty; and then have a peak at the two acres just south of the barn" to narrow the search just a bit.
Your time and assistance is most appreciated.
Hi Bill - I learned this about Ohio in the process of pursuing a foreclosure in the state. The attorney informed me of the requirement. In addition to registering, Ohio also requires that I have an Ohio based agent to "accept service of process" on behalf of my entity.
I don't view this as a big deal. It's fairly quick and relatively inexpensive to set up. Just another hoop to jump through.
In many states the act of pursuing court claims or legal action including the enforcement of a mortgage or deed of trust foreclosure is not considered "doing business".
That said, standing, the legal right for a party to bring a claim forward, is always being challenged from every angle there is. An attorney asking for the Mortgagee to register as an outside of the state company doing business in the state is more than likely an attempt to fight off that particular challenge in case the defense (Borrower) brings it up. There is no state law "requirement" that I know of but if challenged and the court holds it true the Mortgagee's standing to foreclose can be made nil and thus dismiss the foreclosure. A preemptive measure, if you will.
Further, a Licensed Mortgage Servicer is NOT a successor in interest in the Note. This would be what the notion is when folks make the statement - "My Mortgage Servicer has a license so I don't". The Mortgage Servicer in the typical cases represented by the Mortgagees in this thread do not grant the full bundle of rights as a Mortgagee to Mortgage Servicer - the Servicer does not hold the Note, the Mortgagee does. That idea, what bundle of rights is held by a Servicer, seems to be a common reoccurring misconception.
Thank you both for your responses. Learning more all the time. Sooner or later, I'll pull the trigger on a note. But, I'm reading a LOT about the potential pitfalls and I'm trying to be very careful as our capital base is not "all that". Also, I'm very worried about the general economy. The huge distortions in global markets MUST correct. Timing is the only difficult thing to see.
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!