Need to be licensed to invest in notes?

[Monique Baskin]

Does anyone know whether you need to be licensed to invest in notes? I am getting conflicting info. I would like to invest my own money but would ALSO like to find note holders and connect them to institutional note buyers for a referral fee. I am currently planning on investing in the DMV (DC, MD and VA area).

[Bill Gulley]

Hi, if you buy, with your own funds, take possession of the note and hold it or sell it, for you own portfolio you do not need a license.

For mortgages, notes secured by residential real estate:

If you find notes, and forward the note information to others and facilitate a transaction between a note holder and another buyer you need a license as you are then acting as a broker. Buying mortgage notes in your name and doing a double closing using the next buyers funds is a brokerage activity as well.

State laws will set out the types of obligations that would be applicable to a brokerage activity and the requirement for a brokerage license.

Taking an interest in a note may include any option to purchase and then sell the option and is another brokerage activity.

The most restrictive area deals with mortgages of residential, SFD notes. Commercial notes are usually exempt. However, if you are in the business of brokering commercial paper, notes, certificates, leases or other contracted financial obligations you may be required to hold a license to conduct such business.

It will depend too on how you conduct you note activities. If you tell me about a note and then I negoiate the purchase of that note for my portfolio, neither of us need a license. So long as you don't act as a straw man and stay outside the transaction, I can pay you any amount for finding and introducing me to that business transaction.

So it depends on how you conduct your business as to whether or not you need a license. :)