Ever wonder what license you should obtain in California? As the largest
law firm who focuses in the private lending space, let us navigate you
through the two most typical licenses obtained: the Real Estate Broker’s
license (“BRE license”) issued by the California Bureau of
Real Estate (“BRE”) and the California Finance Lender License
(“CFL”) issued by the California Department of Business Oversight
The BRE license has no bonding or net worth requirements and allows companies
to conduct both consumer and commercial lending activities. A licensee
can also provide servicing of loans, offer escrow services, and sell loans
to licensed and unlicensed investors. However, the BRE licensee has fiduciary
duties to the borrower and the lender (investor). The CFL licensee, however,
does not owe a fiduciary duty to either.
Who Can Be Licensed By Either?
Under guidelines established by the California Bureau of Real Estate, a
licensee must be either an individual, a corporation or a limited partnership
where the general partner is a licensed real estate broker. A CFL license
is administered by the Department of Business Oversight and may be an
individual, corporation, LLC, or limited partnership. Due to personal
liability, however, we never recommend the CFL license to be in an individual’s name.
Bonding and Net Worth Requirement
The DBO requires that a CFL licensee obtains a bond of not less than $25,000
and have a tangible net worth of not less than $25,000 for non-consumer
loans and $250,000 for a consumer loans.
An entity licensed under the BRE is not required to hold a bond, and there
is no net worth restriction, no matter what type of loan it is.
A BRE licensee is authorized to make loans with funds from an unlicensed
investor. Under a CFL license, a company can only broker loans to another
CFL lender and is restricted from accepting investment funds from unlicensed
entities or persons. The CFL license is more common for businesses who
are offering lending services using their own money or credit lines. Ask
us how we can structure CFL licensees to obtain funds from unlicensed
Under a BRE license, there is no restriction on who a BRE licensed lender
can sell a mortgage to as long as they are qualified to purchase under
the Investor Questionnaire (See RE 870). Under a CFL license, only an
institutional investor may buy their self-originated loans. They would
need to employ a broker to sell to non-institutional investors.
CFL licensees can only service the loans they have sold to institutional
investors or another CFL licensee, while BRE licensees can service any
real estate loan, whether they originated the deal or not.
Loan Officer Licenses
Under the BRE license, all salespersons who originate loans must have a
salesperson or broker’s license and NMLS endorsement for all consumer
loans. Under a CFL license, unlicensed loan officers can originate loans
but must also have the NMLS endorsement for consumer loans.
CFL licensees do not have many restrictions on construction loans, other
than the fact that they must use their own capital to fund new construction.
However, BRE licensees must deal with a host of restrictions on the type
of funding, amount, and escrow requirements.
It can take an applicant up to six months to obtain a CFL license, while
a BRE corporation license can be issued within 30 days.
All CFL licensees are routinely audited about every three years. BRE license
holders have more oversight and can be audited at will by the Bureau of
So Which Is Right For You?
Call our office and let us help you select the right one. BRE licensees
are typically chosen for people who want to actively sell or broker loans
to private lender investors and CFL licensees are typically mortgage pools,
mortgage funds. With 14 attorneys, we are the largest law firm who specializes
in private money, and we can help you decide.
Contact Geraci Law Firm at (949) 298-8050 today, for more information.