Many California lenders operating via a BRE license are unaware that their
license presents significant restrictions on their business. The reporting
requirements, restrictions on LTV, fee structures and total loan amounts
can often be excessively restrictive in today’s competitive market.
The California Finance Lender’s License (“CFL”) can
bridge that gap and allow a private lender to expand its portfolio with
less operational costs and lending restrictions.
A BRE broker’s license is considerably more restrictive than a California
Finance Lender’s license. Some of the restrictions include:
- Fiduciary Duties
BRE licensed brokers owe a fiduciary duty to their borrowers and their
investors. This includes a duty of loyalty and a duty of care.
- Limitations on Lending
BRE imposes LTV limitations on loans. Limits include 75% for non-owner
occupied SFR and 65% for commercial real estate. In addition, it restricts
loans based on after repair value (FV) to $2,500,000.
The BRE may require quarterly reporting certified by a CPA. Furthermore,
it could also require trust fund reporting.
- Restrictions on Advance Fees
Lenders relying on their BRE Broker’s license are strictly prohibited
from charging borrowers advance fees.
- Ongoing Education
BRE Brokers are required to maintain a continuing education requirement
much like CPAs and Attorneys.
- Real Estate Box
BRE licensees are limited to brokering only real estate and real estate
Under the California Finance Lender Law, a CFL licensee is authorized to
negotiate both consumer and commercial loans, without being hampered by
these restrictions. The CFLL is a “true lender’s license,”
allowing businesses to unleash their full potential and expand their reach
into construction lending and non-real estate financing.
For lenders who want to streamline their operation, expand their portfolio,
and offer larger loan amounts, the CFLL is the way to go.
The benefits of a CFLL include:
- No LTV Restrictions
- No restrictions on advance fees
- No restriction on loan amounts
- No fiduciary responsibility to clients
- Single annual reporting requirement
- No continuing education
- Permissible to finance non-real estate loans
- Permissible to fund large construction loans
Lenders that want to grow their business to new heights need to explore
the possibilities that come along with adding a CFL license. Offer larger
loans, with a more robust fee structure, less restrictions, and less reporting
requirements than is possible with just a BRE license alone.
For more information about how a CFL license can complement your existing
mortgage business, contact Kevin Kim at:
Geraci Law Firm