Q: Is a real estate broker license required to originate or negotiate a commercial mortgage in New York State?
A: Yes. Article 12-A of the New York Real Property Law defines a real estate broker, in part, as “anyone who, on behalf of another for a fee, offers or attempts to negotiate a loan secured by a mortgage, other than a residential mortgage.” Accordingly, in order to originate or negotiate a commercial mortgage, New York State law requires the representing party to have a real estate broker’s license.
Please note that in order to originate or negotiate a mortgage loan on a residential property in New York, the New York State Banking Law requires the representing party to be licensed by the New York State Department of Financial Services (“NYDFS”). A residential mortgage loan is defined as a personal or household loan which is primarily secured by a mortgage on residential real property or on the stock and proprietary lease of a co-op. Registration to originate or negotiate residential loans in New York State is accomplished by submitting an on-line application to the NYDFS through the Nationwide Mortgage Licensing System (“NMLS”). The NMLS is a central database that, among other functions, gathers a residential loan originator’s information for verification by consumers and participating state agencies.
Important tip: While a real estate broker’s license permits a real estate broker to represent a party in a commercial loan transaction, the real estate broker is still expected to act with “reasonable skill and care.” Accordingly, the real estate broker should make sure that they have the requisite knowledge and experience when participating in a commercial mortgage transaction.
The Legal Line Question by:
Neil B. Garfinkel
REBNY Broker Counsel
Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP