Lending License in Ohio

9 Replies

I am looking to purchase a note that was originated in Ohio. I will be holding this note in my 401k as an investment. Does anyone know if I need a “lending license” for such a transaction in Ohio?  I do not plan on brokering notes in Ohio.

Originally posted by @Lincoln Roth :

I am looking to purchase a note that was originated in Ohio. I will be holding this note in my 401k as an investment. Does anyone know if I need a “lending license” for such a transaction in Ohio?  I do not plan on brokering notes in Ohio.

I have a few lawyers that I can refer to you in Ohio 

HI @Lincoln Roth technically "yes", but realistically the licensing is not actively enforced and may only become an issue if you foreclose and the borrower challenges the integrity of the loan. We foreclosed on a home in Cleveland last year and the borrower lawyered-up and they never brought up anything about a lender's license. 

Thanks Bob.  I really appreciate your input.  I know this topic has been discussed in the past on BP.  I have found some 8-9 year old threads, and didn't really find that anyone came up with a definitive answer on the matter.  I would also imagine that this could be an issue (if there is a law on their books), and an investor was self-servicing (and in violation of TILA etc.) or brokering notes.  I have no intent to neither self-service nor broker.  

@Lincoln Roth Welcome...notes are purchased and sold in a private market...if you are buying as an individual you don't need a license...if you start to deal notes things might change. It's a good idea to connect with your CPA about holding the note...why are you putting it in a 401k?...how are you servicing the debt?

Our attorney said that we should have an NMLS license to buy and sell notes in OH, although he also indicated that there has been virtually no case law concerning the consequences of not having one.

You can say the same thing about IL. Our attorney there recommended that we register our LLC to do business in IL and that would cover most issues.

Licensing and compliance can be tricky things and you have to evaluate the risks and necessities of being licensed vs unlicensed. It's easy to say, "Yes, you need a license to do that." What about the costs & time involved to get every single license that "they" say you should get? What if you're doing all of this activity for nothing or for a minimal consequence?

I think you have to look at situations differently and weigh the risks and penalties. My understanding is that GA actively looks for violators and we've heard of one investor having to dump his portfolio right after buying it. We don't buy there now but will as soon as we get licensed to do so.

Having spent countless hours on the phone with their department of finance I can tell you as a note investor you are required to be licensed. So anyone that says otherwise love to hear their opinions on why You are exempt from the following

https://nationwidelicensingsystem.org/slr/PublishedStateDocuments/OH-Residential-Mortgage-Lending-Act-Company-New-App-Checklist.pdf

Now as mentioned what are the chances of being caught ? I have researched very large hedge funds and none of them are licensed - I cannot name one person on BP who buys and sells notes in Ohio who is licensed.

Not being licensed would not invalidate your loan, you could just be subject to penalties.