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Banking Interpretations

NYBL 590(2)

June 17, 2010

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Re: Request for Staff Interpretation

Your May 3, 2010 letter to the Legal Division has been forwarded to me for response. In your letter, you request a staff interpretation with respect to the following factual scenario concerning the licensing requirement under Banking Law Article 12-D, § 590(2)(a):

If Buyer A gives a purchase money mortgage on a Residential property to Seller B at closing and B wants to immediately sell and assign the mortgage to C, is the assigned mortgage included when counting the number of mortgages that would trigger a licensing requirement for C?

Article 12-D, §590 (2)(a) prohibits any:

[P]erson, partnership, association, corporation or other entity [from] engag[ing] 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.

"Mortgage loans" triggering the licensing requirement under Section 590 (2) (a) of Article 12-D is defined in Section 590 (1)(a) of said Article 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 or 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 residential real property.

And Section 590 (1)(b) defines "residential real property" as:

[R]eal property located in this state improved by one-to­four family dwelling used or occupied, or intended to be used or occupied, wholly or partly, as the home or residence of one or more persons, but shall not refer to unimproved real property upon which such dwellings are to be constructed.

With respect to the specific scenario that you described above, since C is not originating the mortgage loan, it is therefore exempt from the licensing requirements of Article 12-D. Although, I must caution that if it comes to the Banking Department's attention that C may be in the regular business of purchasing and receiving assignment of loans or that C is in the practice of "table funding", this might be viewed as a deliberate evasion of the licensing requirements of Article 12-D, § 590(2)(a).  Additionally, if C is regularly reaching out to buyers or sellers to initiate transactions such as these, then C may be required to obtain a mortgage broker registration under the registration requirements of § 590(2)(b) as well, since § 590(2)(b) provides that

No person, partnership, association, corporation or other entity shall engage in the business of soliciting, processing, placing or negotiating a mortgage loan or offering to solicit, process, place or negotiate a mortgage loan in this state without first being registered with the superintendent as a mortgage broker in accordance with the registration procedure provided in this article....

I trust that this is responsive to your inquiry.

Sincerely

Christine M. Tomczak
Assistant Counsel

cc:       Ms. Rholda Ricketts
            Deputy Superintendent
            Mortgage Banking Division

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