Do I need a license to Invest in Notes in Maryland

[Nick Patel]

Does anyone know whether you need to be licensed to invest in non-performing notes (1st lien) in Maryland? I called Maryland State board and was told that as a company (LLC or solo Propritership) I am required to have a Mortgage lending license in MD under my LLC. I felt like she may have misunderstood my question or I was not detailed enough on my explanation. I want to ask BP expert on their experience and knowledge to confirm this information is accurate.

After looking at the Maryland licensing requirement, it seems to be a lengthy and the costly process. Plus yearly renewal. My point of view is that if I have my servicing company doing the outreach and all of the legal requirements then why do I need to be licensed (my LLC is just a passive investor with no direct contact to the borrower)?

Thank you in advance for your reply,

Nick Patel

[Brian Pendergraft]

Time to apply the IRAC method.

Issue: Do you need a license to invest in non-performing notes in Maryland?

Rule: Maryland Code B.R. § 7-101(c) defines a collection agency as follows: "Collection agency" means a person who engages directly or indirectly in the business of...(ii) collecting a consumer claim the person owns, if the claim was in default when the person acquired it.

Analysis: By buying a non-performing note, you are collecting a consumer claim that was in default when you acquired it.

Conclusion: You need to be licensed as a collection agency to buy non-performing notes in Maryland.