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Home > Real Estate Law > Real Estate Broker and Mortgage Loan Broker
Real Estate Broker and Mortgage Loan Broker


SERVING CLIENTS IN LONG BEACH, ORANGE COUNTY, IRVINE, SANTA ANA, WESTMINSTER, HUNTINGTON BEACH, FOUNTAIN VIEW, NEW PORT BEACH, SEAL
BEACH, COSTA MESA, SANTA MONICA, CARSON, TORRANCE, SAN PEDRO,
ALHAMBRA, PASADENA, SAN FERNANDO VALLEY, LOS ANGELES, LAKEWOOD, CERRITOS, GLENDALE, SEAL BEACH, VENICE BEACH, BEVERLY HILLS, AND HOLLYWOOD.


SMITH & GARG – LONG BEACH REAL ESTATE ATTORNEYS

Requirements, Roles, And Responsibilities Of The Real Estate Broker And The Mortgage Loan Broker

California real estate Brokers are regulated under the California Business and Professions Codes §§10000-10581 (known as the Real Estate Law), and by administrative regulations adopted by the Real Estate Commissioner, 10 Cal Code Reg. §§2705-2781, 2830.1-3109. Under these statutes, it is unlawful for anyone to act as a real estate Broker or salesperson unless he or she is licensed by the Department of Real Estate (DRE). Violations of these statutes may be punishable by a District Attorney, and an unlicensed Broker may have criminal liability of up to $10,000 in fines ($50,000 for a corporation) and up to 6 months in jail (Business and Professions Codes §§100130 and 100139). The alleged defendant has to prove that he/she has the license at the time service is rendered. The person needs a real estate license, and must be working under a real estate Broker, when he/she (1) acts on behalf of another person for (2) compensation, which could be more than just money such as an interest in the property that you are acquiring.

There are certain instances that a person may be exempt from obtaining a real estate license. The first and most obvious is when you are selling your own property. Under the Bus. & PC 10131, a person who engages as a principal in the business of buying, selling, or exchange with the public real property sale contracts or notes secured by liens on real property must be licensed as a Broker. Thus, under California law, even though you are selling your own properties, if you sell or refinance eight (8) or more properties per year, you are considered as a Broker. Other exemptions are as follows:



 

Power of Attorney – If a person has the power to represent someone when they are alive and mentally able to have done it themselves, then no real estate Broker license is required. The power of attorney is nullified upon the death of the grantor.

Durable Power of Attorney – The durable power of attorney is sufficient to act on one’s behalf without a real estate license, when the person is still competent, even though they are incapacitated such as in a coma.

  • Corporate officer who acts as a Broker for the corporate property without the expectation of special compensation is exempt from having a Broker license.

    • Expectation of special compensation – Compensation that is above the normal compensation that you would normally getting pay as an employee

  • An Opportunity Broker, who is NOT a corporate officer, needs to be licensed as a Broker. An Opportunity Broker is someone that sells all assets of a corporation, including stocks or tangible good and services.

  • A partner of a partnership who acts as a Broker for the corporate property without the expectation of special compensation.

  • An attorney performing legal services in connection with a real property transaction.

  • A receiver, a trustee of a bankruptcy, or any person acting under a court order in connection with a real property transaction.

  • A Broker ’s employee, such as an administrative or employee of a Broker is not required to have a Broker’s license when acting under the authority and management of that Broker.

  • A resident manager of an apartment building and managers of hotels, motels or trailer parks.

In addition to a real estate Broker who represents a Seller or purchaser in a purchase and sale of a real property, certain people are also required to be real estate Brokers. Under the Bus. & PC §10131(d), a real estate Broker license is required for anyone who negotiates loans or collects payments or performs services for borrowers or lenders or note owners in connection with loans secured directly or collaterally by liens on real property or on a business opportunity. Thus, a mortgage Broker must also have a real estate Broker license. On the contrary, a real estate Broker can act also as a mortgage loan Broker. No special license is required. Mortgage Loan Broker activities are regulated both under the California Real Property Loan Law (Bus & PC §10240-§10248.3) and regulations adopted by The California Real Estate Commissioner.

Certain individuals and entities that are in the business of making, negotiating, or arranging mortgage loans; or purchasing, servicing and selling promissory notes secured by real property are exempt from the requirement of having a real estate Brokerage license. These individuals often times are banks, trusts, saving and loans companies, pension trusts, credit unions, insurance companies and their employees and agents. However, the exemptions are also extended to:

  • A transaction in which the Seller financed the purchase price
  • Agricultural cooperatives and marketing entities
  • A Corporation that is securing credit from a federal intermediate bank
  • Licensed Finance lender acting in the scope of the license
  • Cemetery authority
  • Licensed Mortgage lender or services acting under such license
  • Licensed Security Broker or dealer

Like a real estate Broker who represents the purchaser, a mortgage loan Broker is an agent of the purchaser. As agents, the mortgage loan Broker owes fiduciary duties to the borrower (See details below). The fiduciary duties include the duty of care, including the duty to point out to an unsophisticated borrower any unfavorable loan provisions. In addition, that duty includes pointing out to the client the commission of the mortgage loan to the Broker, and how they can save by following Federal regulated limits in the Real Property Loan Law. Such requirements protect borrowers by limiting the fees may be charged on regulated loans and by requiring detailed and specific disclosures of loan charges and commissions. The Broker must keep records of disclosure for three (3) years.

Should you have any questions or concerns, please contact our experienced real estate attorneys at Smith & Garg, LLC. The experienced real estate transaction and litigation attorneys at Smith & Garg, LLC can help.

Call Smith & Garg, LLC today at 1-877-517-4275 or complete our Contact Form and let us assist you.