License requirements to buy and sell Mortgage Notes and CFDs

Member since 2019 · 20 posts · 1 vote

I am a newbie to buying Notes. Any guidance on if there are any licensing requirements even I plan to use a reputed servicing company

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Don KonipolBusiness Member

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

@Praveen Cherian

So to answer your question it depends on (1) type of property securing the note (2) if the property is residential is it owner occupied and (3) if it’s residential owner occupied what was the purpose of the mortgage loan?

Let’s start with a commercial property. No Federal requirements for buying, selling, or brokering commercial mortgage notes. A few states such as Arizona and Nevada do have licensing requirements for brokering, not owning or buying commercial mortgage notes. However, these states have exceptions for two notes or less brokered within a. 12 month period.

Next is residential non owner occupied. Again,no Federal requirements. However 11 states require a mortgage broker license to broker, or originate residential non owner occupied notes. Two additional states, California and New York, actually require a Real Estate Brokers License.

Now, owner occupied residential real estate. If by chance the purpose of the mortgage loan was commercial,and not consumer related, for example the borrower owns the property free and clear and is borrowing funds to start a business, then the loan will not fall under the SAFE Act, or the Consumer Financial Protection Agency. It will in effect be treated much like the non owner occupied residential loan, with state regulation only.

Owner occupied residential mortgage notes are subject to both the SAFE Act, and regulations by the Consumer Financial Protection Bureau. While compliance regulations are too numerous, complicated and subjective to be listed here, the regulations cover origination (licensed loan originator unless the originator is a Federally regulated financial institution) and servicing. The requirements for brokering existing notes will be covered under state residential mortgage broker licensing requirements, with the exception as previously noted of California and NY where a real estate broker license is required.

Private Mortgage Financing Partners, LLC

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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
6y
@Praveen Cherian
So to answer your question it depends on (1) type of property securing the note (2) if the property is residential is it owner occupied and (3) if it’s residential owner occupied what was the purpose of the mortgage loan?
Let’s start with a commercial property. No Federal requirements for buying, selling, or brokering commercial mortgage notes. A few states such as Arizona and Nevada do have licensing requirements for brokering, not owning or buying commercial mortgage notes. However, these states have exceptions for two notes or less brokered within a. 12 month period.
Next is residential non owner occupied. Again,no Federal requirements. However 11 states require a mortgage broker license to broker, or originate residential non owner occupied notes. Two additional states, California and New York, actually require a Real Estate Brokers License.
Now, owner occupied residential real estate. If by chance the purpose of the mortgage loan was commercial,and not consumer related, for example the borrower owns the property free and clear and is borrowing funds to start a business, then the loan will not fall under the SAFE Act, or the Consumer Financial Protection Agency. It will in effect be treated much like the non owner occupied residential loan, with state regulation only.
Owner occupied residential mortgage notes are subject to both the SAFE Act, and regulations by the Consumer Financial Protection Bureau. While compliance regulations are too numerous, complicated and subjective to be listed here, the regulations cover origination (licensed loan originator unless the originator is a Federally regulated financial institution) and servicing. The requirements for brokering existing notes will be covered under state residential mortgage broker licensing requirements, with the exception as previously noted of California and NY where a real estate broker license is required.
Private Mortgage Financing Partners, LLC
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Cody Cox
Member since 2019 · 12 posts · 10 votes
6y
That’s depends on each state. Some states do not have any requirements. Others do, regardless of having your loans with a licensed servicing company.
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Yael Maroko
Investor · Atlanta GA · Member since 2019 · 35 posts · 20 votes
6y
@Don Konipol
Can you list the states which currently require licensing?
Just to make sure I understood your last paragraph - if I am buying a CFD or a note which were originated (by someone else) as owner occupied (residential) - I need to comply only with the state residential mortgage broker licensing requirements - not anything else, right?

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
6y
@Yael Maroko
Go to the NMLS site and research as it depends on what you’re business is engaged in. Commercial vs residential notes are different etc...
7e investments53 Reviews
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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
6y
Originally posted by @Yael Maroko:
@Don Konipol
Can you list the states which currently require licensing?
Just to make sure I understood your last paragraph - if I am buying a CFD or a note which were originated (by someone else) as owner occupied (residential) - I need to comply only with the state residential mortgage broker licensing requirements - not anything else, right?

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.

Private Mortgage Financing Partners, LLC
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Eli Lederman
New York, NY · Member since 2018 · 215 posts · 50 votes
6y
@Praveen Cherian you want to buy performing or non performing?
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Praveen Cherian
OP
Member since 2019 · 20 posts · 1 vote
6y
both Performing and Non Performing
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Erica Baruti
Specialist · Grayson, GA · Member since 2014 · 45 posts · 18 votes
6y
Madison Management https://madisonmanagement.net services most states.
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