Lender have to be licensed in buyer’ state?

Question

I have a NY LLC client looking to buy a rental property in Philadelphia, PA.
Question: does the lender have to be licensed in PA ? NY? Can it be a lender from another state without a license in either of these states?

Thank you!

Stephanie P. · Answer

Depends on the lender.  Some DSCR lenders allow PA and others do not.  A license IS NOT required to originate DSCR loans in more than 30 states.  They are considered "business purpose" and fall outside RESPA as @Jared Rine has said.

Jared Rine · Answer

@Jay Hinrichs...I'm in agreement with you completely, which is why I can get paid on out of state deals (dscr), depending on the lender.

Jason Wray · Answer

No the lender must be licensed in the state in which it will fund the loan and do the transaction.  Be very cautious if you are being told otherwise.  Not just the lender but the "Loan Originator, Banker, Mortgage Broker" all have to be licensed in that state as well not just the bank/lender.  You can see this on their website it must state which States they can lend in and the license for each state.  You can also go to the NMLS consumer website and look to see if the lender/broker is licensed in the actual state.

The only time a "Banker" is not required is if he/she is a mortgage banker for an FDIC Bank and can fund Nationwide.

Dave Skow · Answer

@Tim Sharkey lender has to be licensed in PA to do a loan in PA

Chris Mason · Answer

Whelp, that's a lot of confusing answers to a simple question. I'll give it a whack.

Assuming a normal vanilla Fannie-type loan, the folks doing the mortgage need to be licensed in the state where the house being lent on is located. In your case, the folks doing the mortgage need to be licensed in PA, but they do not need to be licensed in New York.

Real life example, a Texas doctor buying a wine country estate vacation home in California. I did the mortgage. I do not have any sort of licensing in Texas, just California, where the house being purchased is located. Someone in Texas could have done that loan, but Texas licensing would have been irrelevant, they would have needed their California licensing, it's a California-regulated transaction, no one cares about Texas in that case.

There are in fact mortgage people who live in "flyover country, cheap real estate" areas that don't even bother getting licensed in the state they live in, but have their licensing for multiple states where real estate is more expensive (California is of course always on that list).

Jared Rine · Answer

@Tim Sharkey...I think there's confusion on this post.  If the lender is a direct lender, and you're NOT going through a broker and they are licensed to do business in PA and NY, then you can get a loan from them.  If the lender is licensed appropriately to do business in both PA and NY, and you're going through a broker, then it depends.  That's the true answer.  It's not that everyone has to be licensed.  If that was the case, I wouldn't be able to do out of state DSCR deals with some of my lenders.  It's legal interpretation and if my lenders are NOT getting in trouble, neither am I.  I also have to look out for my own CA licensing (DRE + NMLS).  So that said, my post stands.  I can do deals in PA, no problem with many of my DSCR lenders due to them being business purpose loans (I just literally saved a loan in DE).   NY, is more tricky.  I have some lenders (who are licensed to lend in NY) who will pay out, but with others, no.  And that has to do with how they are structured and legalities, not necessarily mine.  I know where I can lend and not.

Jason Wray · Answer

@Tim Sharkey

Tim the DSCR is a loan that is not under quality mortgage standards as it does not follow TRID and other RESPA rules.  But it still does not change the fact that it is a closed end mortgage.  You must be licensed in the state in which you are conducting business.  There are some attorneys who if only doing a few loans per year do not need a license but I would again stay away from that angle as well.  If you want to be safe and secured through any financial transaction involving a mortgage I would go through an FDIC Bank , Lender, or Mortgage Broker where the company and the individual is licensed in that state.

You also have to ensure you are using a "credited & approved" title company to ensure proper documents, Chain of title, and deed are properly prepared and proper book and page are filed correctly.  This is to protect you in the long run!  Hope that helps.

Tim Sharkey · Answer

@Jason Wray see follow up about non-qm and dscr.

Lender have to be licensed in buyer’ state?

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