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.
- Reporting
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 related loans.
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.
