August 17, 2007
Re: Loans related to Mobile Homes
Dear Mr. [---]:
Your letters, dated February 16, 2007 and June 20, 2007, to the New York State Banking Department (the "Department"), have been referred to me for response. In your letters you asked whether [---] ("Priority"), a company assisting in the financing of mobile homes, would be required to be licensed under the Banking Law prior to being involved in certain business activities in this state.
According to your letter, Priority specializes in providing mobile home loan financing to purchasers of mobile homes. Priority's process is as follows:
- Priority's personnel make sales calls to mobile home dealers and realtors to originate mobile home loan applications;
- Priority then receives applications either by fax or mail;
- Priority then underwrites the loans according to the client-lender's guidelines;
- If the loan meets the lender's guidelines, then Priority submits same to the lender for approval;
- Once the lender issues an approval and agrees to make the loan, Priority satisfies the lender's stipulations and closes the loan;
- At closing, Priority funds the loan through a line of credit; and
- After closing, Priority delivers the loan to the lender for funding.
If the financing involves a "Mortgage Loan" defined by Article 12-D, Section 590(1) of the Banking Law as, "a loan to a natural person made primarily for personal, family or household use, primarily secured by either a mortgage on residential real property ... ." then Priority would first be required to obtain a license as a mortgage banker prior to financing such Mortgage Loans.
Such license is required because Section 590(2)(a) of the Banking Law prohibits any "person, partnership, association, corporation or other entity [from engaging] in the business of making five or more mortgage loans in anyone calendar year without first obtaining a license from the superintendent in accordance with the licensing procedure provided in this article and such regulations as may be promulgated by the banking board or prescribed by the superintendent."
For purposes of Section 590(2)(a), the Department has previously opined that a person "makes" a loan if such person is identified in the loan documents as the creditor for such loan, or stated differently if the loan closes in such person's name. Therefore, if Priority closes the mortgage loans in its name (makes the mortgage loan), then it will be required to obtain a license as a mortgage banker prior to making such mortgage loan if it makes five or more in anyone calendar year.
Turning then to the situation where the mobile home is not affixed to real property: Article 11-B of the Banking Law, entitled Sales Finance Companies, in Section 492 prohibits any "person, except a bank, savings bank, savings and loan association, trust company, private banker or investment company, organized under the banking law of this state and authorized to accept deposits, or licensed lender conducting business pursuant to the provisions of article nine of this chapter, [from engaging] in the business of a sales finance company in this state without a license therefor obtained from the superintendent, as provided in this article." And Section 491 (7) defines a "sales finance company" as "[A] person engaged, in whole or in part, directly or indirectly, in the business of purchasing or otherwise acquiring retail instalment contracts, obligations or credit agreements made by and between other parties, or any interest therein. The term includes a retail seller of motor vehicles engaged, in whole or in part, in the business of holding retail instalment contracts acquired from retail buyers, which have aggregate unpaid time balances of twenty-five thousand dollars or more at anyone time." Section 491 (2) defines a "Motor vehicle" or "vehicle" to also include a "mobile home" or a "manufactured home."
Therefore, based on the above prescriptions of Article 11-6, Priority would be required to first obtain a license as a Sales Finance Company prior to making a loan involving a retail instalment contract. Note that such license would be required even though Priority is located in Northboro, Massachusetts, and possibly, does not even have a place of business in New York State.
I trust the foregoing is responsive to your inquiry.
Very truly yours,
Harry C. Goberdhan