September 10, 2009
Re: Commercial Loan to Condominium Developer
This is in response to your letter of August 4, 2009 in which you asked for a determination, by the New York State Banking Department (the "Department"), on whether a commercial construction lender ("Lender") that makes a loan to a condominium sponsor ("Sponsor") for the purpose of sponsor financing of residential mortgage loans,1 would be required to be licensed under Article 12-D of the Banking Law.
According to the information you provided, the Sponsor would be the lender of record of the residential mortgage loans, or statutorily the entity making the loans. The source of funding for the mortgage loans would be by way of a credit facility from the Lender to the Sponsor, which credit facility would be secured by collateral assignments of the mortgage loans.
Based on the facts you provided, the most pivotal of which is the fact that the Lender would not be making the residential mortgage loans to the purchasers of the condominiums (but instead the loans would be made by the Sponsor), the Lender would not be subjected to the licensing requirement of Article 12-D of the Banking Law.
I trust the foregoing is responsive to your inquiry.
1. Under 3 NYCRR 39.5(a), loans made by sponsors of cooperative and condominium developments to unit purchasers, and loans made by organizations controlled by sponsors of cooperatives and condominium developments to unit purchasers are permitted to be made even though the sponsors or the organizations controlled by the sponsors might not be licensed as mortgage bankers, primarily because the loans as made would be considered exempt products.