Licensing Considerations in the New Secondary
Residential Mortgage Market Frontier

Abstract

We are witnessing a pronounced, albeit gradual, reemergence of secondary residential mortgage market activity. As secondary market investors wade back into the whole loan market, they would be well advised to heed certain regulatory requirements. One of these key requirements is that in certain jurisdictions, absent an exemption, investors need licenses to acquire and sell mortgage loans secured by one-to four-family residential properties. The licensing process is time consuming, expensive, and cumbersome. There are alternatives to obtaining such licenses that investors should consider in special circumstances. For instance, an investor who never intends to use the same entity or vehicle to acquire mortgage loans or will only use the purchasing entity for a brief period of time could purchase the loans from a counterparty and simultaneously transfer legal title to the loans to a Delaware statutory trust with a national bank trustee. Another alternative to licensing that investors should consider is a participation arrangement.