A Quick Guide To Getting Your DRE License To Go Independent

Are you curious about becoming a Private Money Lender? Here is some information to get you started. First off, you will need a broker license in California.

California Department of Real Estate (DRE)

The California Department of Real Estate (DRE) is a licensing agency in California that regulate Mortgage Broker licenses.

This type of license allows you to act as a real estate broker and/or mortgage broker in California. There are education requirements and a test involved. In addition to taking a test, you must complete 45 hours of continuing education every four years.

If you will be making loans to residential borrowers (as compared to business purpose loans), you must get a Mortgage Loan Originator (MLO) endorsement.   You can do this through the Nationwide Multistate Licensing System (NMLS).  There is an additional 20-hour education requirement and successfully completing a test.

California Department of Business Oversight (DBO)

This agency regulates the California Finance Lender (CFL) and the California Residential Mortgage Lender (CRML) licenses.

Finance Broker License:  The limitation of this type of license is that such brokers are only allowed to broker loans with those holding a finance lender license. They would not be able to do business with any other type of lenders in the state, such as banks or credit unions.

Residential Mortgage Lender License:

This type of lender license will permit the making and servicing of California Mortgage loans.

This type of mortgage broker license will permit you to broker loans if they also have a mortgage loan originators (MLO) license. Residential Mortgage Lender License holders can broker to other Residential Mortgage Lender Licensees, as well as institutional lenders, such as state or federally chartered institutions.

A California Finance Lender License holder can act as a broker in connection with loans made by a California Finance Lender License acting as a Lender.  A California Lender license can be issued as a lender, a broker or both. Only companies making or brokering residential mortgage loans are required to be licensed through the Nationwide Mortgage Licensing System (NMLS).

What is the difference between these licenses?

California Department of Business Oversight (DBO) CFLL

Education and Prior experience is not required.

A background check is required, in addition to a minimum of $25,000 net worth.

A surety bond is also required that ranges from $25,000 to $200,000.

California Department of Real Estate (DRE)

This license does require education and prior experience.

A background check is also required on this license.

There are no net worth or surety bond requirements.

The DRE is the most common license used by a new individual or company in the private money lending business.

Can I broker to the public with both licenses?

CFLL – No, you are not permitted to broker to the public.  You can only broker to institutional investors and other CFLLs.

DRE – Yes, you can to California Residents only.

Can I sell my loans to the Public with both licenses?

CFLL- you are not permitted.  You can only sell loans to other institutional investors & other CFLLs

DRE – you are permitted to sell your loans to California Residents only.

Are there any limitations on the loan transactions I can perform?

CFLL – No, but loans just need to be $5,000 or more.

DRE –  Yes, there are lots of limitations.  For example, there are limits on property type, construction loans and loan to value.

Am I permitted to collect Advance Fees with each license?

CFLL – Yup, no restrictions.

DRE – Nope, can’t do it.

Is there any difference in Disclosures that are required with each license?

CFLL –No,  there aren’t any.

DRE – Yes, there are many.  Mortgage Loan Disclosure Statement, Loan Purchase Disclosure Statement, to name a few.

Are there any reporting requirements for each license?

CFLL – Yes, Annual reporting.

DRE – Threshold Reporting, Trust Funding Reporting and Annual Reporting.

Is there any Continuing Education Required?

CFLL – Nope.  None.

DRE – Yes.

Is there a Fiduciary Duty that is owed with this license?

CFLL – Nope. None.

DRE – Yes.  It’s owed to the borrower and investors.

Are there audits by the regulators of my loans and operations?

CFLL – Systematic.  Every three years.

DRE – Random or based on complaints. But they are typically very adversarial.

Is a license required to solicit borrowers?

CFLL – You either need to be licensed or a w2 employee.

DRE – You must be licensed.

Written By: Noelle Wheeler and Bob Spier

Ryan O'Kane I Loan Officer
CA BRE Broker #01845041 NMLS #292685
24 January
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