In Colorado, my understanding is that if you are making business/commercial purpose loans (i.e. the property is to be used for investment purposes and not owner occupied nor for family, personal or household use) that you do NOT need a license to lend out money (unless the money comes from others). I am not an attorney nor am I a legal expert.
On December 7th, 2011 the Denver District Court ruled that DORA (Board Of Mortgage Loan Originators) "... exceeded its statutory authority" by adopting a rule requiring licenses and attempting to regulate for all residential real estate loans regardless of purpose. From the ruling "...Board exceeded its statutory rule-making authority and Rule 1-1-6 is invalid."
Below is from the a blog...
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Some ask why was the rule passed in the first place or “cui bono” (latin “to whose benefit”)?
Many believe that the rule benefited mortgage brokers by giving them a monopoly on loans and preventing private lenders and hard money lenders and even friends and family from making loans to businesses and people to invest in residential real estate or at least forcing them to use a mortgage broker (who in all likelihood would charge fees).
This begs the next question of “who would suffer from the rule?”
Many believe that the community at large and investors suffer as well as private lenders and hard money lenders. Certainly it would be logical to assume that limiting the sources of loans would result in high priced loans (fees and/or rates). More costly and fewer loans may result less homes being purchased and repaired which in turn means less demand for homes and lower prices and more homes that are in disrepair and “eye soars” dragging down property values. Additionally a rule such as 1-1-6, which seems Un-American by limiting competition in business-to-business transactions, probably would have resulted in many individuals and business unknowingly violating the rule and being subject to potential fines for promoting the repair of properties and helping to stabilize homes values.
I would think that many would ask “Why did the Board (DORA) promote the interest of mortgage brokers, limit competition, and slow the recovery of property values (and the economy) when many of the statutes passed to help protect tax payers and homeowners from predatory lending and restore a stability to property values?”
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The aforementioned is my personal opinion only and you should consult a legal expert before acting. I make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information.
