In 2008, the Pennsylvania legislature passed the Mortgage Licensing Act (the “Act”), which was subsequently amended in 2009 and 2010. The Act prohibits individuals and entities from engaging in the residential mortgage loan business without being licensed under the Act. This means that individuals or entities cannot make loans and take back mortgages on residential real estate (real property upon which is constructed or intended to be constructed as a dwelling), unless the lender obtains a mortgage lender license. Violations of the Act may result in fines up to $10,000 for each offense. Show
The Act includes certain limited exceptions to this general prohibition, most notably, an exception permitting an individual to lend money to a member of the lender’s immediate family and take back a residential mortgage. “Immediate Family” is defined under the Act as a parent, spouse, child, brother or sister (but does not include other family members, including grandparents and grandchildren). It is important to note that the Act does not apply to loans for business or commercial purposes or properties. A common practice, particularly in the current real estate market, is for a seller of a residential property to finance a portion of the purchase price and take back a residential mortgage on the property. The Act has been interpreted by the Pennsylvania Department of Banking to prohibit these “private money mortgages,” unless the borrower and lender are “immediate family members” as defined under the Act. A seller or builder of residential property has other options available to assist a buyer in the purchase of their property. For example, the seller/builder and buyer may enter into a lease-purchase agreement or an installment sale agreement arrangement. The primary difference between these arrangements and the private money mortgage (to take them outside of the purview of the Act) is that title to the residential property does not transfer to the buyer and the seller does not take back the residential property as collateral during the term of the lease or installment sale agreement. We will continue to monitor legislative developments in this area. If you have questions, feel free to contact Sarah or any other member of the Real Estate or Construction Law Groups. In Pennsylvania, anyone engaged in the mortgage loan business, whether an entity or individual, must obtain a license at the state level. The mortgage licenses are regulated and issued by Pennsylvania Department of Banking and Securities. The mortgage license application process is handled by the Nationwide Mortgage Licensing System (NMLS). NMLS allows mortgage companies and loan originators to apply, update or renew a license online. Types of Mortgage Licenses in PennsylvaniaThe state of Pennsylvania has three main state license types: Company, Branch, and Individual. Each license type depends on the work you are going to perform. In this guide, we’ll cover the most common licenses only. You can review the full list on the NMLS website. Most Common Company Licenses
Most Common Individual Licenses
Pennsylvania State RequirementsAll license applications must be submitted via NMLS. Please note that some agency-specific documentation, such as the original surety bond, must be mailed directly to the Department at The Pennsylvania Department of Banking and Securities, Non-Depository Licensing Office, 17N 2nd Street, Ste 1300, Harrisburg, PA 17101-2290. For additional assistance and information regarding the license requirements, you may contact the Department at (717) 787-3717 or [email protected]. For NMLS-related questions, please contact their call center at (855) 665-7123. Education and ExamsIn Pennsylvania, passing an exam is obligatory for some license types. To obtain a Mortgage Broker, Lender or Loan Correspondent license, at least one company officer must complete a course and pass a test . All Mortgage Originator license applicants are required to complete an education course and pass an examination. Exams for Company Licenses
Exams for Individual Licenses
|
