Private money, non-bank lenders, also called hard money lenders have always lent money without the need of a mortgage licensing. But the financial reform following the real estate meltdown, namely the Dodd Frank Act, has subjected most financial services companies to regulation. For non-bank lenders who are lending their own funds, whether as individuals or as an organized company or fund, it now depends on the property “type” whether or not mortgage licensing is required. If one is lending one’s own money, or a fund’s money, on residential property with one to four units, one may need to be licensed depending on the State the property is located.

Many hard money lenders are confused and believe it is not the property type that dictates licensing, but rather the occupancy status, e.g. owner occupied versus non-owner occupied. This is the most common mistake that hard money lenders are making, and this mistake could cost them up to a $10,000 fine per transaction if caught making loans without a license on residential property. Make sure you’re in the know if you’re lending your own funds or other people’s funds! Don’t consult an attorney, but rather start by calling the Division of Real Estate or the Division or Mortgage Lending at your State level. Whichever institution at your State level that governs mortgage lending and/or real estate. Give that State regulatory official that you speak with, a very detailed description of the type of lending you are doing, how you’re doing it, etc. Bottom line, under the Dodd Frank Act, you must now have a mortgage license in most States in the U.S. to originate residential loans on properties one to four units, regardless of whether the properties are owner occupied or not.