Dodd Frank Forces Some Hard Money Lenders to be Licensed – How Will This Affect Your Business?

[Corey Dutton]

Most mortgage brokers have felt the pain of the Dodd Frank bill but it doesn’t just affect traditional mortgage brokers. Depending on your State, even hard money lending, that has been largely unregulated in past years, is coming under licensing requirements. There is a wide range of opinion on this. Some hard money lenders say if they are lending their own money that they don’t need a license. Some say if they aren’t lending on owner occupied properties that they don’t need a license. But, if you are lending on residential properties (1-4 units) you may need to contact the Division of Real Estate and/or Division of Mortgage Lending in your State to see what the new requirements actually are for hard money lending.

For example in Utah, even if you are lending your own money on residential properties (1-4 units) you must be licensed as per new Law. Most people will argue and say this only applies to lenders who are lending on owner-occupied residential properties. However, in Utah it applies to anyone lending on residential 1-4.

Is this helping or hurting consumers? I think in many ways its hurting them. So many people come to us for a hard money loan on their primary residence because their credit has been hurt in recent years. They have no place to turn except a hard money lender and now we can’t even give them a loan. I don’t think this is helping anyone.

Also, how will this affect the private lending industry? The private money sector is saturated with private lenders and brokers. Everyone is a hard money lender these days. Will this new licensing requirement weed out the industry and make it less saturated?

Would love to hear your comments on these two questions.