License requirements to buy and sell Mortgage Notes and CFDs

[Praveen Cherian]

I am a newbie to buying Notes. Any guidance on if there are any licensing requirements even I plan to use a reputed servicing company

[Don Konipol]

@Praveen Cherian

So to answer your question it depends on (1) type of property securing the note (2) if the property is residential is it owner occupied and (3) if it’s residential owner occupied what was the purpose of the mortgage loan?

Let’s start with a commercial property. No Federal requirements for buying, selling, or brokering commercial mortgage notes. A few states such as Arizona and Nevada do have licensing requirements for brokering, not owning or buying commercial mortgage notes. However, these states have exceptions for two notes or less brokered within a. 12 month period.

Next is residential non owner occupied. Again,no Federal requirements. However 11 states require a mortgage broker license to broker, or originate residential non owner occupied notes. Two additional states, California and New York, actually require a Real Estate Brokers License.

Now, owner occupied residential real estate. If by chance the purpose of the mortgage loan was commercial,and not consumer related, for example the borrower owns the property free and clear and is borrowing funds to start a business, then the loan will not fall under the SAFE Act, or the Consumer Financial Protection Agency. It will in effect be treated much like the non owner occupied residential loan, with state regulation only.

Owner occupied residential mortgage notes are subject to both the SAFE Act, and regulations by the Consumer Financial Protection Bureau. While compliance regulations are too numerous, complicated and subjective to be listed here, the regulations cover origination (licensed loan originator unless the originator is a Federally regulated financial institution) and servicing. The requirements for brokering existing notes will be covered under state residential mortgage broker licensing requirements, with the exception as previously noted of California and NY where a real estate broker license is required.