DRE Compliance: Why it Matters

Nichole Moore:

Welcome to Geraci’s DRE Compliance: Why it Matters Webinar. My name is Nichole Moore. I'm one of the senior attorneys at Geraci. Welcome back to those of us who are clients and who we know. And hello to new folks who are joining us today. If you are unaware, Geraci Law Firm is the premier legal partner for private lenders specializing in business purpose loans throughout the country. Today our webinar is going to be playing the keys to Private Lending success, and our wonderful host today will be Laine Prescott and Casey Busch, who will now introduce themselves to get us started.

Laine Prescott:

Hi everyone, my name's Laine. I'm one of the attorneys on the Banking and Finance team here at Geraci. I'm very excited to be here with you guys today for this webinar.

Casey Busch:

Hi, I am Casey. I am one of the other attorneys on the Banking and Finance team. Really excited to talk about DRE compliance today.

Nichole Moore:

Thank you both. So some quick housekeeping matters before we get started. The webinar is set for an hour, but the actual presentation portion will be about 45 minutes. Leaving 15 minutes left over for question and answers at the end. If you have questions, please, please utilize the question and answer box rather than the chat feature. So once again, please make sure you drop any of your questions in the question and answer box. The webinar will be recorded and the recording will be disseminated to all registrants either today or some time tomorrow. If you don't receive it, please feel free to reach out and we will make sure to get a copy to you. That being said, let's get started.

Laine Prescott:

Okay. Hi everybody. Welcome to the webinar today. Today, obviously as Nichole said, and hopefully you guys are all aware of already, we are going to be discussing DRE compliance. We have a few objectives for the agenda today. First is to discuss the RE seven, which is the dre's compliance manual. If you're not familiar with it, it's very in depth. It has a lot of really great information, but it's very detailed on DRE brokers in general, not just business purpose brokers. So we've pulled some really good information out of there for you and we're going to go over that with you as well as broker responsibilities, kind of breaking down what your role should be, what your responsibilities are in terms of licensing and running your own business and things like that. In addition, we'll go over disclosure, determination and we'll discuss borrower disclosure specifically and what disclosures you're required to provide for each transaction.

So here's the agenda. We'll start out with some licensing of business considerations. Then we'll get into funds and fees and borrower disclosures. After that, we'll get into some more specifics with Article five and article six, which are very relevant to our industry and it has a lot of really important information for you to be aware. And then we'll finish out with special loan types and licensees acting as a lender. So I'll start us off today with licensing and business considerations. First up, of course, in California, if you're engaging in broker activity like your negotiating loans or soliciting loans, you do have to have a broker's license for that as well as to collect a fee for that. You should be licensed. Not only should you have your own license, but if you have various locations or you use DBAs, you should have a license for each one of those as well.

You also have the originator's endorsement, which is for brokers who originate residential a, a consumer loans. So for those of you that live purely in the business purpose world, you really don't have to worry about that, but it does come up every now and then we get questions. So wanted to go ahead and mention it. Brokers of course do not work alone. So you have other people involved in your business like broker associates, salespersons employees, and the licensing requirements for them are going to depend on kind of the role that they're playing with you. So broker associates are brokers that have, they hold their own broker license, but they really act more in a salesperson's role. They work under another broker instead of on their own. So they do have their own broker's license though, and they should maintain that in order to do brokering activity.

Salespersons do have their own type of license, so instead of a broker license, they'll have a salesperson's license. Unfortunately for salespersons in terms of licensing compliance for loans and to get that user exemption, salesperson's license is not going to be sufficient for those purposes. So occasionally we'll get loans where people will include a salesperson's license for the broker information, and usually we just go back to them and just let them know like, Hey, that's not going to work for compliance purposes for licensing requirements in California. So we usually just get the whatever broker they work under. Lastly is employees. So employees do not necessarily have to have a license as long as they're not involved in negotiation between principals. But you want to be very careful with them that they are true employees. So if you're managing them, controlling their day-to-day work, supervising them, and they're a true employee, they do not need to have a license.

But if you are working with an independent contractor instead, then they do have to have a license. So you want to be very careful with your relationship with them and making sure they have true employees so you don't accidentally engage in unlicensed behavior. In terms of business considerations for document retention, generally every document for the transaction should be retained for a period of at least three years. There are three exceptions to this, which are the self-dealing statement, the investor qualification statement, and the investor questionnaire, which have to be retained on file for at least four years. So if you're really not sure, or you really don't want to run the risk that you accidentally don't retain that long enough, you could just retain all of your documents for a transaction for four years so that if the DRE meets them, they are accessible for that amount of time.

The DRE also provides a advertising regulations. This is mostly under California Code Regulation 28 48, and the overarching thing here is that your advertisements cannot be false, misleading or deceptive, which is just very generic terminology that that's not providing really a lot of guidance. But if you look deeper in the regulations, they do kind of lay out some more information what's going to be required for your advertisement. So for example, you should always have your license number included in an advertisement, and they have font sizing guidelines for that as well. They don't want it tucked away in this tiny little corner on a billboard that nobody can read from the ground. They want to make sure it's very prominent and that it's accessible. The content of your advertisement will also determine how much information you have to include in there. So for example, if you're going to be advertising a certain payment amount, you should also include things like your loan amount, the A PR, the loan term, all the things that go into that payment amount so that it's giving potential borrowers that you're advertising to a full picture of how you got to that payment amount.

For advertisements though, if you're ever unsure, the DRE will review these on a voluntary basis. So you are welcome to submit your ad to the DRE and get a kind of compliance check from them and make sure that your advertisements are good to go. Finally under here is the business activity and mortgage call reports. I'll actually start with the mortgage call reports, and they're pretty easy because these are only applicable for mortgage loan originators, which as I mentioned before, the originator endorsement is only for residential or consumer loans basically. So if you are purely in the business purpose world, you really don't have to worry about mortgage call reports at all. However, you do still have to submit that business activity report to the DRE if you broker one or more loans secured by a one to four family property in California. And this business activity report basically is just a report of all your loan activity.

So it's going to include, for example, information about institutional lenders, the number of fixed rate or variable rate loans that you brokered for that year, loans with prepayment penalties and non-traditional mortgage loan products, which we'll talk about a little bit later as well. And this is just completed on an annual basis on the dre's website, and it's due within 90 days of the end of your broker's fiscal year. So that's very important to keep in mind. It's not based on a calendar year or the dre's fiscal year. It's based on your individual fiscal year. So you have to be very careful and make sure that you're keeping an eye out for that.

Casey Busch:

As you might imagine, the Department of Real Estate is very concerned about how you handle fees from your clients. So moving on to fees in the trust account. As a broker, you should have a trust account and the general rule, the first question that you want to ask yourself when considering whether a fee should be in the trust account is was this fee or expense advanced by the broker? So yes, if you did advance the fee, then the fee does not go into the trust account. If you did not advance the fee, then the fee goes into the trust account. So the first example here is the appraisal and credit report fees. This is something that often is advanced by the broker because you want to get the ball rolling on the loan. So you front the fee, get the appraisal and credit report done, and you get reimbursed by the borrower.

Well, oftentimes a broker might wait to get reimbursed later or something. Well, that fee can go in the trust account and then later on the borrower will okay, you moving it to your general account. So there's really four rules to look at for the appraisal and credit report fee. First off is funds don't go into the trust account if they're reimbursing you for the fee. So if you already paid for the appraisal and credit report fee, then the borrower pays you back. That fee will go directly to you. It won't go into your trust account. So the second rule here is fees cannot be marked up as far as a markup. It has to be the fee. The general rule is you have to charge the fee that the appraisal and credit report actually costs. If you do charge a markup, you have to identify that as a loan cost later.

So keep that in mind if you are charging a markup for having to handle the appraisal and credit report yourself. Third here is clear accounting records are required, especially regarding borrower funds that have been expended to pay vendors. So this would include appraisal and credit report fees. So make sure you're keeping clear accounting records of any appraisal and credit report fees or any just advanced fees period. You really want clear accounting records. The fourth rule is clear instructions have to be provided from the borrower to the broker authorizing the reimbursement to the broker's general account. This is whether it's in the trust account or not. So if you've advanced the funds yourself and then the borrowers reimbursing, you still want clear instructions that those fees will go into your general account. And then likewise, if the fee was charged to your trust account and you're taking it out of the trust account, you want clear instructions from the borrower, especially in that case that you can move those funds to your general account.

Moving on to advanced fee agreements, the DRE does allow advanced fees to be collected, but they have to be held in your trust account until the services are completed. Advance fees are any fees claimed, demanded, charged, received, or collected prior to completing the contracted services. So the general rule here is to just wait until closing to get your fees. If you get an advance fee, this is a pretty rare situation. It's not something that we see too often, but if there is a situation where you collected an advance fee, keep in mind you want to keep that in your trust account until you've completed the services that the fees are for. Now, with advanced fees, you do need California DRE approval, the agreement between you and the borrower, the lender must be approved by the Department of Real Estate for each transaction. So in this case, you can't just make a template, get it approved by the DRE and then reuse it over and over.

You have to send each agreement for each transaction to the Department of Real Estate and get that approved. As far as advance fees for modifications and forbearances or any posts original closing or origination, you can collect advance fees for those. So you will have to comply with all of the additional requirements. So mainly you have to get your fee agreement approved by the DRE, and that is for each modification in forbearance. So if you're collecting advanced fees for mods and forbearances, remember to get those approved by the DRE and remember, the fees have to be in the trust account until the services are completed. Don't take them out before. That's a big thing that the Department of Real Estate really looks at is making sure your trust account is handled properly.

Laine Prescott:

Okay, now we'll move back into borrower disclosures. So something I want to note here is that DA brokers are required to provide both investor and borrower disclosures for each transaction. We're not going to discuss investor disclosures in this webinar, but if you have questions, feel free to reach out and we're happy to help with that. Today we're just going to focus on the borrower side. So here's a nice handy list of the disclosures that are required to be provided to the borrower, and these should be provided within three days of receiving their completed written loan application. The big kahuna one here is the mortgage loan disclosure statement, and there's two different forms that you're going to use depending on the structure of your loan and what property is involved. And basically the mortgage loan disclosure statement is going to provide a really big picture overview of everything involved with the transaction in terms of numbers, so things like fees and the loan amount, the interest rate, all of that good stuff's going to be included in there.

Any compensation that you're expecting to earn as part of the loan should be included as well in this disclosure, as well as your DRE broker number and information. The dre's contact information as well for the actual department should be included. And then if there are any broker controlled funds involved, so for example, if you're acting as a lender as well in this transaction, that should be disclosed in there in addition. So all of this is going to be signed by the borrower, and of course, three days from the application to closing can sometimes be quite a long time. So if there are changes, of course they do happen from disclosure to closing, you just have to disclose that to the borrower in a timely manner, which is again, very generic, but as long as you're doing it as soon as you can, you should be pretty much good to go.

Moving on, you have the privacy policy, which is pretty simple. The ECOA appraisal disclosure. I do want to note the ECOA is a federal law, but California does have an extra notice regarding unbiased appraisals to include as well. So you definitely want to make sure you're using the correct appraisal disclosure with all of the right language included so you don't accidentally commit a violation for that. Then you have the Patriot Act disclosure, the multi disclosure and the fair lending notice, which is another DRE form, importantly the fair lending Notice. Also, if you're ever working with the CFL lender, there is a version of it with the DPI's contact information, which is their kind of regulatory body. You want to make sure you're providing the one with the dre's contact information, get it from the DRE directly, and then you won't have that issue come up.

And you also have the borrower authorization form and the hazard insurance disclosure. So kind of big picture things to note here is that obviously we're speaking in English, but not everybody does. If you ever have a situation where you're negotiating with a borrower in another language, you should be providing these disclosures to the borrower in the language that you're primarily negotiating in the DRE for at least the forms. Have other versions of this on their website in Spanish, Chinese, Vietnamese, Korean, and Tagalog, I think. So if you need those, definitely go check out the D'S website and make sure you're using the correct form and the correct language. Also, something else to note here is if you're playing multiple roles, so for example, if you're representing the borrower in the underlying real estate transaction and you're also soliciting or arranging the loan, you have to provide a written disclosure of that kind of double position that you're doing both sides of this to all of the parties within 24 hours. So that's very, very important to include. It's very strict. Obviously that's much different than just saying timely manner. It's within 24 hours it must be written. So definitely make sure that you're covering your bases with that. And lastly on here, like any other document, these do have to be retained for a period of at least three years. So make sure you keep these on file and ready in case the DRE ever requests them.

Casey Busch:

Okay, moving on to article five of the DRE regulations. This article governs or well regulates private money transactions. I imagine that's most of you here if you're our clients, but private money transaction includes private individuals, non-institutional lenders, and note purchasers, so not banks, not credit unions. Article five starts off with the pooling of loan funds. This is, I think if you have a lender who maybe is lending on three transactions, it's like $300,000 total. They can't send the money all in at once. They have to send it separately for each specific transaction. You can't pull all of the investors' funds and then disperse it from there. They have to send the money in separately. Keep that in mind, especially later on when we start talking about fractionalized loans or just repeat lenders in general. Self-dealing is also regulated by Article five. Self-dealing is when a broker who is soliciting funds for a transaction is soliciting funds for a transaction that will benefit the broker.

So self-dealing is obviously something that the Department of Real Estate wants to regulate and look at, but they do allow it in certain situations. So if you're going to engage in a transaction where they're self-dealing, make sure you get a lender purchaser disclosure statement. The LPDS, this is a disclosure that you give to the lender. You have to make sure you give it to them 24 hours before you receive any funds. The LPDS is also the RE 8 51 A. If you're keeping notice of the different disclosures and their numbers, that's a good template to use if you want to just snag that off the DRE website later on. Article five discusses threshold reporting requirements. This is a pretty rare situation. I don't imagine most of you are in this threshold reporting requirement, but there are four ways to meet the threshold reporting requirements. So first off, the negotiation of 10 or more loans over a million dollars in a 12 month period.

These loans have to be secured by liens on real property or business opportunities, and you have to be acting as an agent of another. And then these loans also have to be sales or exchanges of real property or notes secured by liens on real property. And so that's the first way to exceed the threshold requirement. Next, collecting payments on behalf of beneficiaries aggregating $250,000 or more or collecting payments on behalf of borrowers, aggregating $250,000 or more. And then the final way of meeting the threshold requirement, a negotiation of two or more loan sales notes or real property sales aggregating more than $250,000 in three months or five or more, aggregating 500,000 in six months. This a lot of ways to meet this, but it's pretty rare that you would meet these requirements.

Now, if you are a threshold broker, there's a few disclosures that you'll have to complete on top of your normal disclosures. First is the RE 8 53, which is just the threshold notification. You'll send this to the DRE within 30 days of meeting any of these requirements. And next two are the re 8 54 and the re 8 81. It's the trust account review and the business activity report. These have the same timeframe. You're going to want to submit these 90 days before your fiscal year end. And then as far as the trust fund status report, the re 8 55, you want to do this 30 days before your quarter ends and then the re 8 56 and re 8 54. These will depend on whether you're using a trust account or not in your threshold activities. If you're using a trust account, you'll use the re 8 56. If you're not using a trust account, you'll use the re 8 54.

As far as investor questionnaires, the DRE does want to make sure your investors have the assets and the background to complete these activities that you're soliciting. So you'll have to provide an investor questionnaire, which is the RE eight 70. This is an important document that you're going to need from each investor for each transaction, and it's mainly just getting into investor's information. For repeat investors, you will need these. So if you have an investor who works with you quite often, make sure you get it for each of their transactions. Often they just need to update their information, maybe their bank accounts changed or something. Make sure you get this for each investor for each transaction.

Now, article five is where we get loan to value considerations. A very important aspect to look at if you're a broker, making sure your loan, the encumbrances on the property are within the DRE regulations. So when calculating loan to value, you're using the aggregate amount of encumbrances, and that says a percentage of the property's current market value. So if you're a first position and there's a second position lien on the property, you have to calculate your LTV using both of those liens. You can't just use your lien, you have to use the aggregate amount of the encumbrances. Likewise, if you're a second position lien, you have to take into account the first position lien on the property. Now, if you're just using your standard LTV, there's really not a lot to worry about, make sure you're under the percentage. But as far as construction loans, there are some different requirements if you're using the current loan to value or if you're going to use the after repaired value.

The after repaired value is after the construction is finished, what is the loan to value of the property? Keep in mind that with construction loans and if you're using the after repaired value, there are some restrictions on holdbacks, like if you are under a hundred thousand or over a hundred thousand. There's also, if you're using after repaired value limitations on the loan amount, it's two and a half million dollars. If you're using after repair value, we could fill up an entire webinar just on the construction loans, and we have several times prepared webinars on the construction requirements for the DRE. So if you have questions on the construction requirements themselves, reach out to us and we can answer those questions. As far as brokers acting as loan servicers, that is something that the Department of Real Estate allows. There are pretty small requirements here in Article five.

There are times that you might have to advance funds to protect an encumbrance on behalf of the investor, the lender. Keep in mind that those funds will have to maybe be held in the trust account, so you'll have to have trust account disclosures. There are also times where you might need to record documents as a loan servicer, so keep that in mind if you're engaging in services to become a loan servicer. If maybe an investor would prefer you to be a loan servicer, these are some duties that you'll have to take on as a loan servicer.

Okay, moving on to article six. This covers fractionalized loans, otherwise known as multi beneficiary loans. These are, you're pretty much looking at all the same requirements as a normal private money loan as far as advertising and everything, there's a couple more subtle nuances that we'll go over here. So first, you're going to need to prepare a multi lender transaction. Notice that's the re eight 60. This needs to be submitted within 30 days of your first fractionalized loan. Any material change of information in your lending services or becoming a servicing agent for notes with payments exceeding $125,000 due within a three month period. The third one's pretty rare. I don't imagine most people are going to be engaging in those servicing activities with that much money, but those first two, first fractionalized loan or any material change of information, make sure you submit your multi lender transaction.

Notice the re eight 60 within 30 days. As far as the advertising restrictions, they're basically the same as a normal loan except for each investor needs to get an LPDS, the loan purchaser disclosure, and that's obviously if you're doing self-dealing, but make sure each investor gets one investor suitability, each investor will need to get their own questionnaire. You can't just have one questionnaire for all your investors. And again, that's each transaction. Each lender needs the investor questionnaire as far as documenting defaults. So this is where fractional Alls loans can kind of get tricky defaults. If one lender decides to default, it's a default on all of the lenders. So you can't just pick and choose which investors want to default. If there's disagreement or something, they have to iron that out because defaults on one is a default on all as far as trust accounts and controlling funds, again, like I mentioned, funds cannot be pooled for separate transactions.

So you can't just have five lenders send all their money in for five different loans. It has to be each loan separately and each lender separately. And on top of fractional, all these bullet points here, keep in mind that fractionalized loans may have securities issues. So in California, you can have up to 10 investors on a loan that are located in California. If they're located outside of California, please let us know if there are some securities issues that we run into quite often with fractionalized loans, and we want to make sure you're not running into any securities violations.

Laine Prescott:

Okay, so we're going to move now into special loan types, which here we're going to focus on the non-traditional mortgage loan products. These are going to be your interest only or your negatively amortizing loans that are secured by a one to four family property. They have their own special regulations. As you can tell, they're not traditional. So the DRE keeps an eye on these. First of all, as I mentioned earlier, you have that mortgage loan disclosure statement that goes out to the borrower. This is the situation where you're going to use that first form that's listed the RE 8 85 instead of the RE 8 82. That one's specifically for interest only loans on one to four family properties. So definitely make sure you're using the correct form upfront when you're offering these loan products.

You have also some compliance requirements. You are required for these loan products to adopt all of the policies and procedures under the interagency guidance on nontraditional mortgage product risks and the statement on subprime mortgage lending. These are both done kind of more on a federal level, but they do provide, like I said, policies and procedures on things like risk management, underwriting and consumer protections. So definitely make sure you're familiar with them. There's a lot of information, so we're not going to deep dive into them, but you should familiarize yourself with them as well. It is important to note though, that for the statement on subprime mortgage lending, that is applicable only to a RM or variable rate loans. So if you don't offer variable rate loans, you don't broker loans like that, then you really don't have to worry about that one at all. In terms of advertising though, these mortgage loan products have additional advertising regulations surrounding them under California Business and Professions Code 1 0 2 35 and California Code Regulation 28 48, I did mention 28 48 earlier, but this here is going to focus on subsections A 17 and a 18.

These are applicable to your variable rate loans, your interest only loans, and your negatively amortizing loans, specifically a 17 basically just provides information that you should be including in your advertisements. There's a whole list of them in there. It's pretty thorough. So definitely just go ahead and take the time, take a few minutes to read through that, and if you're planning to advertise any of these products, make sure you're comparing and you're fully in compliance with that subsection. A 18 though provides some more regulations for ads on these nontraditional mortgage loan products. That also include phrases like no income or no asset or lower no doc stated income or stated asset loans. If you're going to be advertising a non-traditional mortgage loan product and using any of those kinds of phrases or you're advertising that type of product, you also have to disclose in the advertisement that these loan types or these loans may have higher rates points or fees associated with them. So definitely make sure, again, if you aren't sure that your loan or your advertisement is fully in compliance, you can reach out to the DRE, get that voluntary check done and make sure you are good to go in terms of all of these extra requirements for advertising this type of loan product.

And our final topic here for the day is licensees acting as a lender. So the DRE does require lenders who broker and sell eight or more loans in a year secured by a one to four family property to hold a dre's broker license. So your regular CFL isn't necessarily going to work. You may also have licensing requirements under the dre's requirements as well. If that sounds like you act as a lender as well and you fit those requirements, then you should definitely check that out and make sure that you're fully in compliance. You also, when you're acting in this role, you are subject to California Code Regulation 28 44, which is, it provides basically more policies and procedures related to underwriting risk management, control systems and consumer protection guidelines. So very similar to those federal guidelines I mentioned on the last slide. This is just even more to add to your day-to-day and make sure that you're fully in compliance with that.

So definitely check that out. If you're going to act as a lender or you're interested, you want to make sure you are not running a foul of any of the regulations. Lastly here, you have some additional reporting obligations when you're acting as a lender. This is the residential mortgage loan report, the RE 8 57. This is filed with the DRE and it's applicable for lenders who have assets less than $10 million, and they regularly make real estate loans, which is defined as you making 12 or more real estate loans in the prior year that total over $500,000 and you make 10% or more in qualified loans. So if that sounds like you, then you should definitely get this done. And it's very important to note that the deadline for this is March 31st each year. So if you need to get this done and you haven't yet, and you have five days to do so. So if you need any assistance, reach out. But the deadline is coming up very soon. However, it is important to note that if you file, there's a very similar report on the federal level that if you file under the HMDA on the federal level, you very likely have an exemption for this filing requirement. So you don't really have to worry about that too much, but if you do not file on the federal level and you act as a lender in this capacity, you definitely want to make sure to get this done with the DRE.

Nichole Moore:

Well, thank you Laine and Casey, that was a really, really, really good presentation. So now we're going to open up the floor to questions. We do have quite a few questions here, and so I'm going to go through and toss these out for Casey and Laine to field. If we are unable to field them in the moment, we will let you know and just shoot us an email and we will get the information to you as quickly as possible. So the first question comes from David. He wants to know regarding the usury exemption for DRE brokers, does he have to identify as a broker in any of the loan documents when he's lending his own money? And if so, where in the loan documents should he identify his broker information?

Laine Prescott:

Yeah, I can take this one. So for our loan documents, we have the brokers listed on the cover page of the closing instructions. It's not actually part of the loan documents, but in the loan and security agreement, we do include a provision that basically states that it's made or arranged by a DRE broker. So we don't include the broker's information in there directly, but we do have that provision so that it's recognized that it was arranged by a broker, and it'll help get that user exemption for you.

Nichole Moore:

Thanks, Laine. So this next question comes from Merca, is the loan servicing disclosure on a one to four regarding whether your intent to retain the servicing not required? I'm not sure if I understand that question, but you, Marco, we may need you to provide us a little bit more color for that. The next question is, as for the advanced fees, is an upfront deposit considered an advance fee and do you have to get it by the DRE each time?

Casey Busch:

Okay, I'll take that one. So it really depends on what the deposit is being used for. If the deposit is going to be used for your origination fees, the broker, then yes, it would be an advance fee and you do need to get the DRE approval each time.

Nichole Moore:

Do non-institutional lenders, including any financial institutions without CFL, does non-institutional lenders including any financial institutions without CFL licenses? Kyle, I'm not sure if there's more.

Casey Busch:

I think that includes me for the article five. So as far as this is really more of a DRE presentation, so including any financial institutions without CFL, whether you have a CFL doesn't really make you an institutional lender, I wouldn't say, but if you have a specific sort of scenario or something, maybe reach out to us separately

Nichole Moore:

As a broker owning own funds to make only business purpose loans, what are DRE notification requirements? I think Laine went over that a little bit.

Laine Prescott:

Yeah, so I feel that's more than the last slide of, or maybe even the disclosure slide. If you're using broker controlled funds to make a loan, you have to disclose that to the borrower as part of that mortgage loan disclosure statement. So make sure you include that. I'm not aware of any notifications directly to the DRE, but I could certainly look into that if you would like more information. And then of course, if you do that and you meet that threshold of the licensees acting as lender, so you're making eight or more in a year secured by the one to four, you have those extra possible reporting requirements if it's applicable to you, if you're under $10 million in assets and all of that. So that's going to be a little more specific to your situation, but happy to discuss with you further if you want to reach out.

Nichole Moore:

Albert asked whether or not there's a list of CPAs that can be hired to certify trust reporting to the DRE Albert. If you send us an email offline, we may be able to assist you there. I'm looking at what are the primary differences between a private investor versus an institutional investor.

Laine Prescott:

I can actually discuss that one if you want. There is a definition for non-institutional investor. It's based on your net worth. I don't remember the numbers off the top of my head, but if you want to reach out, we can certainly provide that information to you.

Nichole Moore:

So some of these questions were answered. So is a loan servicing disclosure on a one to four regarding whether your intent, I think I just addressed that. And so some of these other questions here, if you send us an email, they seem to be a bit incomplete, so we will be able to answer those a little bit better in a closed offline environment. But if anybody else has any additional questions, A lender who is A DRE license only, are they only allowed to accept the loan application from DFPI license brokers for Business Purpose Loans and DSCR loans? Casey or Laine, do you want to take

Laine Prescott:

The DFPI doesn't do broker licensing. That's for CFL lenders. First of all, lender who's A DRA license only, are they? I don't think there's any restrictions on who you accept loan applications from. You just have to keep in mind that anybody doing brokering activities, so if they're arranging this loan or soliciting the loan, they should have their own license, their own broker's license to do that. So you just want to be very careful with that, especially if they're getting paid a fee that everything's in compliance and good to go. If I'm not understanding that correctly, though that question, please reach out. Happy to discuss a little further.

Nichole Moore:

Okay. And Kyle, your question seems to be a bit fact sensitive. So if you please just reach out to us about the business activity reports. If there's a construction loan with multiple SFRs, reach out to us and we can get you an answer for that. It looks like one more question may have come in, don't almost all brokers qualify as threshold reporting? Well, yeah, so Casey mentioned this in the webinar. He mentioned that that would most likely not be applicable to most lenders.

Casey Busch:

Yeah, it depends on really what you're using your license for. So as kind of speaking generally to a lot of clients who might use different licenses or CFLs or something. But yeah, if you are in the threshold reporting requirements, make sure you do your threshold reporting disclosures.

Nichole Moore:

Okay, so I think that is about all the time that we have now. Thank you so much. If you have additional questions, please send either Casey, Laine or myself your questions and we will get back to you on a one-on-one personal basis. But I want to thank everyone for joining. This was a very, very informative webinar. Thank you, Casey. Thank you Laine. And with that we're going to end the webinar and hope that everyone has a great day.