If you’re considering becoming a private lender or you’re facing a deal in a new state, you might be questioning what licenses you need. Upholding regulatory compliance is an important part of ensuring all your practices remain fair and legal. However, determining your private money lender license requirements can be complex due to several factors.
State Requirements May Vary
While private lenders are often subject to federal laws, states handle the majority of private mortgage lender licensing requirements. This means the licensing you need may vary depending on where you practice.
If you’re a business-purpose lender, some factors that can impact your licensing requirements may include:
- The borrower
- The property type involved
- The scope of the loan
- The purpose of the transaction
Not all states require licensing for business-purpose lending, but many do, which is why it’s critical to familiarize yourself with the regulations in your state if you are planning to lend money.
Private Mortgage Lender Requirements
Under the federal Secure and Fair Enforcement for Mortgage Licensing Act, all states must require a mortgage lender license for residential lending. Overall, consumer private lending license demands are likely to be more stringent.
However, states are not obligated to require a mortgage lender license for business-purpose loans. While some states may require you to be licensed regardless of the details of the loan, others may only require licensing for certain types of collateral.
States With Notable Requirements
While states have their own unique mortgage lending licensing requirements, a few places may demand extra due diligence if you plan to practice there. A few states that are known for being more restrictive include:
- Arizona
- California
- Oregon
- Nevada
- Vermont
- North Dakota
- South Dakota
California, for example, requires licensing for all brokers and lenders in the state. It also requires license applicants to maintain a net worth of at least $25,000. Meanwhile, Vermont also requires its commercial lenders to obtain licenses.
Some states, such as Oregon, have more specific requirements. Oregon requires licenses for commercial loans involving a one- to four-family residential property.
The unique requirements impacting lenders and brokers in different states can make the licensing process seem daunting. If you are unclear on the details, it’s important to partner with a law firm that can help break down the individual policies in your state.
Private Lender Law Can Help
Maintaining proper regulatory compliance safeguards your practices and helps you prevent future legal issues tied to your investments. If you need a partner with expertise on specific private mortgage lender requirements, Private Lender Law can offer support. We know how to navigate the complex legal landscapes of individual states across the U.S. and will work with you to close every deal in full compliance with relevant regulations.
We provide a full range of services to business-purpose lenders nationwide. Contact us today for more information about how we can help you meet the proper private lending license requirements.