buying mortgages in Florida - Posted by Bob Smith

Posted by Rich[FL] on March 22, 2006 at 15:06:17:

That does all seem rather confusing. Keep in mind, though, that the way the rules read, it’s not even legal to sell a mobile home in FL unless your a dealer, even for yourself. However, it’s done every day. What will happen if they get caught? Is anybody even looking?

If you look for problems, you’ll find them; if you look for solutions, you’ll find them too. However, it is always good to be aware of the sand traps (or alligator pits for those of you here in FL!) so one can find solutions. For now, I’m not changing any of my plans.

Rich

buying mortgages in Florida - Posted by Bob Smith

Posted by Bob Smith on March 21, 2006 at 23:54:13:

I had always thought that private purchasers were exempt from licensing. That’s what the Statutes appear to say. Then I saw this from the Administrative Code: http://www.flofr.com/licensing/RulesStatutes/Rule69V-40.htm#v290

Check out 2c, 2e, and 2f. Yikes! Is this really applicable? How are you ever supposed to purchase a mortgage without doing the proscribed acts in 2c and 2f?

Re: buying SELLER CARRYBACK mortgages in FLA. - Posted by David Butler

Posted by David Butler on March 26, 2006 at 13:56:31:

Hello Again Bob,

Well dang… looks like the “cybergremlins” absconded with my original reply several hours ago? Probably just as well. It was too long, with regard to this type of venue.

You’ll note from many of our prior replies on the licensing topic ? considering the issues in play ? we feel a discussion board venue poses many significant disadvantages for most folks, particularly those who are new to the note business, and/or otherwise not trained in legal research. Several major disadvantages include:

  1. Attorneys are highly trained to perform legal research, and render legal opinions on specific issues, both generally, and usually by necessity, in light of specific fact patterns. But generally, they do not do a very good job at this, until and unless THEY ARE ON THE CLOCK!!! As a result, you won’t find many skilled attorneys perusing these types of Forums and/or giving away much more information - or any more helpful - than what lay people (myself included) will. And in some cases what they do offer is wrong, or close to wrong… because they haven’t yet researched the law on a given topic such this, as thoroughly as some of us lay people have, and feel too safe in giving a generic knee-jerk conservative response.

  2. Students often misinterpret what is said. So responsible respondents have to be overly careful in not sending others down the wrong path. This leads to very generalized replies, that too many students then erroneously take as “gospel”

  3. Students often present questions absent the proper context, which greatly affects the accurateness and/or interpretation of a specific statute or its application - in a given state, or in a specific “fact pattern”

  4. There are 50 different states with 50 similar - yet different - sets of laws. Moreover…

  5. Many types of statutes essentially offer nothing more than guidance, until and unless an Appellate Court interprets a given statute and then applies its holdings in published case law.

Most critically?

  1. far too many legally untrained folks wind up jumping in and either misquoting law, or voicing unfounded interpretations is a manner that sounds factual - confusing a majority of visitors, particularly newbies.

That being said, we do recommend that everybody who intends to own ANY commercial enterprise (whether it be owning their own business, or managing their own investments) do some CAREFUL reading of the law, and CONTEMPLATION of what it actually says - both in part, and in the overall scope and context of the entire statute(s) they are researching.

The several advantgages of that approach are:

  1. becoming better skilled at research and analytical reading - very practical for higher probability of success in the note business and your confidence in your abilities to thrive in it.

  2. better grounding for faster and broader comprehension of a broader range of legal and investment topics that may become relevant to you as you progress through your note and investing endeavors.

  3. better understanding of the law, and thus, less fear of it!

To begin resolving your issues here, remember that law does not exist in a vacuum. Statues that feature many subsections and clauses, are defined by the entirety of relationship to each other. And here, you are going through several statutes, each related to very specific language in each other.

So, before moving through the possible answers to your several questions here, and in your additional query immediately below in this thread - think back through the full scope of Sec. 494 to develop a feel for its context. Best bet is to first CAREFULLY read the first subsection Definitions, and CONTEMPLATE how the statute defines “Mortgage Broker”; “Mortgage Lender”, “Mortgage Lending”, and the types of loans described, as they relate to this regulation.

Then carefully review the applicable subsections of Sec. 494, keeping in mind what each clause states, how that fits with the other clauses, and when obvious - how the language used includes the terms you have already thoroughly learned from your study of the Definitions of those terms as they are defined in the Statute itself.

Now - let’s decide what Sec. 494 is really all about. From my vantage point, FS Sec. 494 is clearly intended to regulate the mortgage lending (i.e. mortgage origination) industry. The private cash flow industry is not about mortgage lending, except in the most specious ancillary way. True, practioners can grow into that activity if they desire (assuming they decide to get whatever license they might be required to have from state-to-state). But we are NOT involved in mortgage lending. This is a very important starting point ? because all regulatory statutes tend operate with a specific intent in mind.

Further clues of the intent of Sec. 494 are found by way of the several exceptions described in 494.006 Exemptions. Here are just a couple of the more relevant for our purposes here:

(1) (d) Any person who, as a seller of his or her own real property, receives one or more mortgages in a purchase money transaction.

(1)(e) Any person who receives a mortgage as security for an obligation arising out of materials furnished or as services rendered by the person in the improvement of the real property.

*Note - interesting to observe that Florida actually allows a broader field, with regard to the activies exempted in these other two clauses in Sec. 494.006

(1)(i) Any person making or acquiring a mortgage loan with his or her own funds for his or her own investment, and who does not hold himself or herself out to the public, in any manner, as being in the mortgage lending business.

(1)(j) Any person selling a mortgage that was made or purchased with that person’s funds for his or her own investment, and who does not hold himself or herself out to the public, in any manner, as being in the mortgage lending business.

MY COMMENT: notice the emphasis on the phrase “… mortgage lending business…” in the two above clauses. Relate them back to the scope and content of your review based on the steps we covered above.


Okay… let’s dissect your assumption - “I had always thought that private purchasers were exempt from licensing.”

Answer: Nope. But many people make that mistake. While it CAN be true that private purchasers are often exempt; it is not because they are private per se. Rather, it is because (like in most states) the statute exempts ANYBODY, or company, or other entity - when purchasing “privately created” Seller-Carryback purchase money mortgages, which are considered to be a cash deferment of the balance of the entire purchase price, rather than a “LOAN”. (such as the Exemptions described above at Sec. 494.006 (1)(d) and (1)(e)). And as described in the statute, there are other exceptions as well.

But as we have mentioned in other ?licensing? threads, a handful of states, do put certain limitations on this activity (California is one such state. See full discussions involving California licensing by way of the search feature at top of the Forum.)

Now let’s dissect the several issues in your comment:

“Check out [69V-40.290] 2c, 2e, and 2f. Yikes! Is this really applicable? How are you ever supposed to purchase a mortgage without doing the proscribed acts in 2c and 2f?”

Answer: Yes, the rules are applicable. The best way to exempt yourself from them by acting very carefully, and very creatively, in your marketing efforts; and in the conduct of your business activities in relation to purchasing mortgages.

I think we can all accept that it is impossible to believe that our marketing efforts won’t place us “… in a position where he [we] is [are] likely to come into contact with borrowers or investors or buyers or sellers of mortgage loans”, even if we completely focus on only soliciting sellers and buyers of private carry-back purchase money notes.

But let’s consider a common sense perspective here. Assuming we believe that all of the above “regulations” are intended to regulate the “mortgage lending” industry, rather than putting private note brokers and buyers out of business ? we can analyse our actions in terms of ?are we doing something so badly that regulatory authorities are drawn to sanction us??. For example:

  1. Do we frequently field inquiries from folks looking for mortgage loans, or only occasionally?
  2. Do we regularly get inquiries from noninstitutional buyers and/or sellers of mortgage LOAN pools?
  3. Do regulating agencies get many complaints about our activities, or only a few? Or none?

Personally, I think the wording in the related statutes is a bit to vague, and overly broad, to cause us much, if any harm ? particularly the horribly restrictive guideline offered in 69V-40.290 (2)(e)!

Unfortunately, the last time I looked at the Annotated FS, I saw no Florida case law references related to application of the ?solicitation? regs. But I do know that Florida has been a huge state (routinely in the annual top 4 or 5 states) in the buying and selling of private notes, including real estate, mobile home, and business notes. I know that a great many of these folks have no license whatsoever.

I can?t speak for their advertising, because I haven?t ever investigated it. But looking at the example given in 69V-40.290 (2)(e), I can easily think of several ways to creatively work around that, all in good faith. These are more cumbersome than is the case in other states, but, if the effect determines whether or not you are going to do anything ? then cumbersome is better than doing nothing. Since I let this response get waaayyyy too long already, I?ll leave it to others to provide examples.

In the meantime, hope this helps, and best wishes for
your success!

David P. Butler

Re: buying mortgages in Florida - Posted by Rich[FL]

Posted by Rich[FL] on March 22, 2006 at 11:46:01:

Good question. However, I don’t see the state’s Attorney General going after all the people who advertise in all the penny saver and magazines that “I buy mortgages” but that’s not to say it doesn’t or won’t happen. I guess if you don’t advertise to the “general public”, you’ll be OK; sending postcards to or calling individuals wouldn’t necessarily be construed as soliciting to the general public. Therefore, 290(1) would apply.

Rich

Below is the full text of paragraph 290:

69V-40.290 Acts Requiring Licensure as a Mortgage Broker, Mortgage Brokerage Business, Mortgage Lender or Correspondent Mortgage Lender.
(1) A person shall not be deemed to be acting as a mortgage broker pursuant to subsection 494.001(3), F.S., to be acting as a correspondent mortgage lender pursuant to subsection 494.001(1), F.S., or a mortgage lender pursuant to subsection 494.001(4), F.S., for:
(a) Purchasing or offering to purchase a mortgage loan from a member of the general public.
(b) Selling or offering to sell a mortgage loan to an institutional investor.
© Negotiating or offering to negotiate the purchase or sale of a mortgage loan to an institutional investor.
(2) The phrase ?holds himself out to the public in any manner? in subsection 494.006(1)(i) and (j), F.S., means that any person who does any of the following, but not limited to, is not exempt from mortgage lender or correspondent mortgage lender license requirements:
(a) Is a business entity which makes, sells, or offers to sell, mortgage loans to noninstitutional investors;
(b) Is employed or associated with a business where mortgage lending or mortgage brokering services may be received;
© Has placed himself in a position where he is likely to come into contact with borrowers or investors or buyers or sellers of mortgage loans;
(d) Advertises, related to mortgage loans, by soliciting for borrowers, lenders or purchasers in a telephone directory;
(e) Advertises in newspapers, magazines, or the like in a manner which would lead the reader to believe the person was in the business of buying, making or selling mortgage loans. For example, placing an advertisement which states ?I buy and sell
mortgages? would lead the public to believe the person was in the mortgage lending business; or
(f) Solicits in a manner which would lead the reader to believe the person was in the business of buying, making or selling mortgage loans.

Re: buying SELLER CARRYBACK mortgages in FLA. - Posted by Bob Smith

Posted by Bob Smith on March 26, 2006 at 21:44:03:

Did more digging. 494.001(16) says: “Make a mortgage loan” means to close a mortgage loan in a person’s name or to advance funds, offer to advance funds, or make a commitment to advance funds to an applicant for a mortgage loan. I believe the implication is that mortgage lending involves giving cash to a borrower. Thus a seller-carryback is not a loan (duh!), contacting a person owning one is not “contacting a borrower or investor or buyer or seller of mortgage loan” (Administrative Code 69V-40.290(2)©), and purchasing one not a purchase of a mortgage loan. Therefore, without more, buying a carryback is not a licensed activity. Whew! Crisis averted.

69V-40.290(2)(e) can perhaps be finessed by changing your ad or solicitation from “I buy mortgages” to “I buy seller-carryback mortgages”, which should IMO not mislead anybody into thinking you buy mortgage loans. Heck, I don’t think you have to turn away an owner of a mortgage loan who erroneously contacts you to sell, since purchasing or offering to purchase a mortgage loan is exempt activity under 69V-40.290(1)(a).

Re: buying mortgages in Florida - Posted by Bob Smith

Posted by Bob Smith on March 22, 2006 at 13:24:59:

Advertising isn’t the only issue. The real problem is 2©. Merely “placing yourself in a position where you’re likely to come into contact with a seller of a mortgage loan” eviscerates your exemption? Yowsa! It may well be that the AG doesn’t prosecute such cases currently, but that doesn’t mean he can’t. That’s scary. Note that your postcards example doesn’t fly: 2(f) covers that case. And it still doesn’t explain how you can perform the exempt act of “offering to purchase a mortgage” without performing the non-exempt act of “placing yourself in a position where you are likely to come into contact with sellers of mortgage loans”.

Re: Covering The Bases! - Posted by David Butler

Posted by David Butler on March 25, 2006 at 17:35:42:

Thought I would add a comment here, to again reinforce the point I made in my response immediately above…

2© does not “…eviserate your exemption”. Rather it limits how you do certain things. I believe that language is too broad to be too effective from a practical standpoint - IF - approached in the manner described in the other reply. Also note that last time I looked at the actual Annotated FS, there is no case law (i.e. “controlling law”) in Florida otherwise.

It might be helpful to have a bit of a different perspective in the mix too:

Car insurance doesn’t prevent your car from being stolen, or otherwise damanged;

Medical insurance doesn’t stop you from having major heart surgery (you can take that one as gospel ;-)…),

Life insurance doesn’t help in the least in preventing your death.

Each has it’s place, but doesn’t cover every base!

Continued best wishes for your success!

David P. Butler