Problem? - Posted by Amanda

Real Estate Investing Real Estate Law
1

Posted by John on July 19, 2004 at 19:04:48:

Amanda,

If you find a seller and then find a buyer and put then together you are
not brokering. You are a finder.

If you provide advice and otherwise facilitate the sale of the note then
you are brokering.

The point being that you do not need a license or anything else to
introduce two parties who then construct their own deal. If you broker
some states require a license (mortgage broker or RE broker license).

Your firm’s employment contract and the compliance department
might have a view on what you can and can not do. As you are not
dealing in securities they might care very little about your outside
business interests. Or they could have a policy about outside business
interests as a general rule.

I worked for a number of investment banks and the policies varied
quite a bit.

John

2

Problem? - Posted by Amanda

Posted by Amanda on July 18, 2004 at 15:21:08:

I am interesting about real estate note. I am currently working for brokerage firm with series 7 license. If I am involved selling/buying note, am I in trouble?

3

Why… - Posted by David Butler

Posted by David Butler on July 18, 2004 at 17:07:00:

should you be “in trouble”??? :o

On the other hand, similar to what a licensed real estate agent, or a loan officer working for a mortgage broker - has to consider - what does your employment agreement with THEM say about your outside investing activities? Does make you “in trouble”, but may have some prohibitions against competing with your own broker/employer, or required to pay “the house” for certain of your activities. But that’s a whole 'nuther story, right?

By the way, lots of regular folks (like me) who are NOT “registered securities dealers” of any type, buy and sell stock. Lots of other folks (again, like me), buy and sell real estate, without any kind of licensing requirements.

And on the other side of the coin - I know lots of licensed stockbrokers who buy and sell stock for their own accounts; real estate brokers who purchase real estate for their own accounts; car dealers who purchase cars for themselves, mortgage brokers who get property loans for their own use… ad infinitum. And many of these folks do the same thing in “crossing-over”. I know car salesmen who buy and sell homes without getting in any kind of “trouble”. Stockbrokers who buy cars and homes, and occasionally resell the same, without getting into “trouble”; real estate brokers who buy cars and stocks and resell the same without getting into “trouble”???

So… which of these other activities would YOU be in trouble for doing? Why do you THINK you would be in trouble here???

David P. Butler

4

Re: License to buy - Posted by G.O.

Posted by G.O. on July 23, 2004 at 24:14:20:

“By the way, lots of regular folks (like me) who are NOT “registered securities dealers” of any type, buy and sell stock. Lots of other folks (again, like me), buy and sell real estate, without any kind of licensing requirements.”

David, could you help me with this, please?

GENERAL LAWS OF MASSACHUSETTS
http://www.mass.gov/legis/laws/mgl/gl-255e-toc.htm
CHAPTER 255E. LICENSING OF CERTAIN MORTGAGE LENDERS AND BROKERS.
In Chapter 2 regarding license requirements it states that “…provisions of this chapter shall not apply to any mortgage lender making fewer than five mortgage loans within any period of twelve consecutive months.”
So, is there a limit?
However, in the defintions it states that a lender is the one who makes loans or issues commitments for mortgage loans.
Is this where the difference lies: making loans versus buying on the secondary market? And if so, what exactly constitutes a secondary market?

Thank you in advance,
G.O.

5

Thank you - Posted by Amanda

Posted by Amanda on July 19, 2004 at 04:38:43:

Thank you for your reply. Since I am new about note business (just start learning), I want to be careful. You are right, many stock brokers buying/selling stocks for their accounts. We (lisenced broker or any person who has lisence) are abligated to report all activities to employer. As long as we report all the trades, we are fine. I recently read a book about note business which stated that I can find seller and buyer and earn commission to match them. I believe that if I do that (that mean, I will be the broker?) I may have to talk to my employer. Well, I am a student now and have to learn many more about this business. I also have to employment agreement again.

Thank you for your reply!

Amanda

6

Re: License to buy - Posted by David Butler

Posted by David Butler on July 26, 2004 at 12:20:45:

Hello G.O.

Not only does is the definition clear, the Ch. 2 cite you offer is also clear. A mortgage lender is just that - a person who originates loans. A note finder finds existing notes - privately held notes almost exclusively - and, as discussed extensively here in this Forum… notes that were created by way of the seller financing part, or all of the sale price of his property, by carrying back a note on the property sold (i.e. seller carryback purchase money mortgage).

He then sells the information on the notes he finds to an investor; or alternatively, he buys the note himself and “flips” it to an end investor.

Making loans is much different than buying existing loans. However, another difference exists. In some states, buying loans originated by mortgage lenders may also require a lenders’ license. Buying privately held “seller carryback purchase money mortgages” does not, in most states.

In the several states where some type of license MAY be required (lending, mortgage broker, or real estate broker) for regularly buying and selling these types of notes, there are also many exceptions clearly spelled out in the applicable statutes.

For more specific details, you may want look through the mountain of threads related to “licensing”; along with some relevant discussion related to “creating notes”; “purchase money mortgage”; “seller’s exemption”; “owner carryback”; and “ostensible loan”. Enter any of these terms as your keywords in the “search” facility at the top of this Forum, and you’ll pull up a lot of helpful discussion that will help you gain a better understanding of the big picture in terms of the private cash flow industry.

As to the term “secondary market” - a secondary market is that in which people or companies buy and sell EXISTING loans.

In traditional financial markets, the “secondary market” buyers are generally large institutional players (the two largest being “Fannie Mae” and “Freddie Mac”). In the private cash flow industry, there are a variety of buyers making up the “secondary market” - but the product is primarily privately held notes, rather than institutionally originated loans.

Hope that helps, and Happy Hunting!

David P. Butler