Under a California Bureau of Real Estate license, a broker may engage in private trust deed lending for “non-consumer” mortgages. However, a broker’s license requires that the broker issue disclosures under California real estate law to both the borrower and lender, as well as providing certain filings to the Department of Real Estate. See below for a list of the standard documents just remember that your situation may require more (or less) documentation.
Are you wondering which docs are what? Geraci Law Firm has organized them in a list of (a) non-consumer lending borrower, (b) non-consumer lending lender and (c) investor specific documents you need to obtain. Further, they have provided links to the documents that you need:
Non-Consumer Lending Borrower Disclosures
- State and Federal Fair Lending Notice – Fair Lending Notice must be presented to all borrowers and states that the loan is compliant with The Housing Financial Discrimination Act of 1977.
- Mortgage Loan Disclosure Statement – Under RESPA, a lender is required to present an applicant with a statement of all the costs incurred by the loan within three days of an application.
- Notice or Right to Receive a Copy of the Appraisal – This disclosure notifies the borrower that he has a right to obtain and review a copy of the appraisal after it is performed and prior to loan closing.
Non-Consumer Lending Investor Disclosures
- Investor Questionnaire – A form that analyzes and evaluates the financial ability of an investor to engage in private lending. If you do not like this form, you can create an alternative; however, since this is a “Safe Harbor” form, we recommend you use it.
- Lender/Purchaser Disclosure Statement – These are a series of disclosures that are required before an investor funds a loan or purchases a loan. It also states that an assignment of a deed of trust will be recorded under their name. CAUTION: Some of you use this form to broker out-of-state fractional loans (where either the property or the investor is out-of-state). You CANNOT use this exemption to do so.
- Investor Suitability Statement– A form that provides a statement from the investor that the loan will not exceed 10% of their net worth, excluding a primary residence.
- Business & Professions Code 10236.7 Disclosure: A form that alerts the lender of the type of securities exemption for which the loan qualifies.
- W-9 IRS Form – Report of taxable income to the IRS.
- Appraisal Waiver Form – A waiver form for the lender to waive their right to receive a copy of the appraisal.
- Loan Servicing Agreement – This is an agreement provide by the broker to the investor specifying who will be servicing the loan. The agreement indicates the terms of the servicing contract and whether servicing will be done directly by the broker, or a subservicer. Note: If your subservicer is also BRE licensed, they will need to directly contract with your investor in order to service the loan.
- Title Report and Policy – The investor is entitled to receive a preliminary title report on the property being used to secure the loan.
- Loan Summary or Loan Documents – The investor has the right to receive a copy of the loan documents or a broker loan summary describing terms of the loan.
Broker Filing Requirements
The following are filings you need to complete as a licensed BRE real estate broker if you are doing private money lending:
- Multi-Lender Transaction Notice – This is a one-time filing for all multi-lender mortgages.
- Mortgage Lending Activity Notification – This is a one-time filing for all brokers engaging in mortgage lending.
- Mortgage Trust Status Report – A form that is required to be filed quarterly detailing the status of a servicer trust account.
- Mortgage Loan Business Activity Report – This report is due 90-days following the end of the broker’s fiscal year.
- Threshold Notification – This form indicates a certain threshold for brokers. Brokers must provide a one-time filing if a particular threshold is exceeded.
- Advertising Compliance Filing – This is an annual filing confirming that the broker has complied with all advertising requirements and guidelines.