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Banking Interpretations

NYSBL 590 and GRBB Part 38 and 39

March 13, 2006

[ ]
Re: Commercial Loans in New York
Dear [ ]:

Your letter dated November 30, 2005 to the Banking Commission, New York State (the “Department”), has been referred to me for response. In your letter you asked whether the Department would provide written approval to a Nevada State licensed mortgage broker that wants to solicit and make commercial, vacant land and construction loans, and also solicit for investors in New York.

According to your letter, [ ] (the “Entity”) will solicit and make commercial loans, including loans made in connection with the ownership of vacant land, and construction loans. If the Entity will only be involved in making commercial loans, including loans made in connection with the ownership of vacant land, then it does not need a license or any prior approval from the Department, prior to being involved in such activity in this State. Note that this conclusion is made based on your representation that the Entity will not solicit nor make “mortgage loans” in this State, as such term is defined by General Regulations of the Banking Board Part 38.1 (m):

[A] loan made to one or more individuals primarily for personal, family or household use primarily secured by a first or junior mortgage on residential real property located in this State or by certificates of stock or other evidence of ownership interests in, and proprietary leases from, corporations or partnerships formed for the purpose of cooperative ownership of real estate in this State. Such term shall not include residential loan products exempt pursuant to section 39.5 of this Title.

According to Section 39.5 (b) “construction loan mortgages” fit squarely within the above recited exemption, and the Entity is therefore not required to be licensed as a mortgage banker to make, nor registered as a mortgage broker to solicit such loans.

As to your second question, relating to the solicitation of investors in this State, please be informed that the Department does not regulate such activity, and therefore, would not opine on its legality, which is best left to the Attorney General of the State of New York and/or the Securities and Exchange Commission.
I trust the foregoing is responsive to your inquiry.

Very truly yours,
Harry C. Goberdhan
Assistant Counsel