[Max]

This memorandum focuses on North Dakota’s unique commercial loan broker regulations, offering a fresh perspective without revisiting the South Dakota framework.

Commercial Mortgage Licensing Compliance Memorandum – North Dakota

Date: August 25, 2026

Analysis: A Residential Mortgage Company Employee is Handling a Mortgage Loan for a Seasonal, Eight-Unit Rental Property in North Dakota, Which Has the Following Features:

• The property is closed for the winter
• The property is an investment or rental property
• The loan purpose is for a business/investment
• The Mortgage Loan Originator (MLO) holds a North Dakota MLO license with Approved-Inactive status
• The company employing the MLO lacks the required North Dakota lending or broker authority.

Discussion

• Here, the MLO can broker the mortgage loan only if the property is a one- to four-unit owner-occupied residence.
• North Dakota treats commercial lending and commercial loan brokering separately under its Money Brokers Act.
• In North Dakota, commercial lending means arranging loans.
• According to NDCC §13-04.1-02, a person must have the right license or an exemption to arrange loans with a North Dakota borrower.
• Coast 2 Coast Mortgage Lending, LLC must hold a North Dakota Money Broker License to conduct a loan transaction with a North Dakota borrower, unless a statutory exemption applies.
• Money Broker licenses with Approved-Inactive status for LLC members do not comply with North Dakota rules and do not allow the deal to be completed.
• The LLC and its members cannot move forward without active sponsorship.

Moving Forward Hinges on Verifying the Borrower’s Residence or the Organization’s Location.

• This transaction most likely falls under commercial real estate or a business purpose, rather than a residential mortgage.
• This memorandum assumes Coast 2 Coast Mortgage Lending, LLC does not hold a North Dakota Money Broker License for the proposed commercial mortgage activity.
• The following conclusions rely on these assumptions, which must be confirmed before proceeding.

An Eight-Unit Seasonal Rental is a Commercial Transaction

• North Dakota separates residential mortgage transactions from non-residential transactions.
• NDCC §13-10-02 defines a “residential mortgage loan” as a loan primarily used for personal, family, or household purposes, secured by a dwelling or residential real property containing a dwelling.
• The term “dwelling” in the mortgage rules, taken from Reg Z, means a home with one to four living units.
• An eight-unit apartment property does not meet this definition.
• The business purpose clearly makes this a commercial deal.
• Loans to buy, improve, or manage rental properties that are not owner-occupied are usually for business purposes.
• Even if the owner lives there, buying more than two units or fixing up more than four units usually counts as business credit.
• Most eight-unit seasonal rentals that earn income should be treated as commercial or business loans.

Does Closing During the Winter Change the Classification?

• In most cases, it does not.
• Closing on a property in winter alone does not make an income-producing eight-unit rental a regular residential mortgage.
• Seasonal use mostly affects how lenders evaluate the loan and the property’s use.
• They consider expected rental income, costs, cash flow, debt coverage, savings, management, insurance, and the property’s ability to pay its debts during slow seasons.
• But these loan evaluation factors do not change the type of license needed.

A Residential MLO License Is Not the Main Licensing Issue

• North Dakota defines a Mortgage Loan Originator as an individual who, for pay or expected pay, fills out the application or negotiates terms for a residential mortgage loan.
• Specific aspects of commercial lending, and states in its FAQs:
• Commercial lending is not considered residential mortgage activity.
• Yet they state that commercial lending is subject to separate licensure under NDCC Chapter 13-04.1.
• This distinction helps clarify the different types of lending activities involved.
• Therefore, the concern will not be:
• “Since the MLO is licensed in North Dakota, the MLO can originate the commercial loan.”

Nor Should the Concern Be:

• “Commercial loans do not require a license.”

Instead, the Concern is:

• “Does North Dakota’s Money Brokers Act require a Money Broker License for the company or person handling this specific commercial loan?”
• This question is at the heart of the licensing issue.

North Dakota Has Express Statutes Governing the Brokerage of Commercial Loans.

• The Money Broker statute uses a broad and flexible definition for money brokering.
• It covers arranging or giving loans or leases, advertising or finding lenders, or providing money for people or businesses needing funds for any reason.

Uncertainty with This Statement in its Regulatory FAQ:

Commercial lending is considered a money-brokering activity in North Dakota.

The NMLS North Dakota Money Broker licensing Checklist Similarly Defines Activities Covered by the License as consisting of:

• commercial financing;
• commercial loan lending;
• commercial loan brokering;
• agricultural lending or brokering;
• consumer lending; and
• other lending or brokering activities.

NMLS notes that North Dakota’s Money Brokers Act uses broad language that covers almost all lending and brokering activities.

Therefore, it is incorrect to assume that commercial lending in North Dakota is exempt from money-broker licensing requirements.

4. Borrower Residence Is an Important North Dakota Licensing Trigger

There is an interesting and important factor in NDCC §13-04.1-02.

The law says money brokering in North Dakota applies when the borrower lives there.

DFI also states the same in its official FAQ.

Therefore, compliance teams must pinpoint exactly who the borrower is.

The Borrower Can Be:

• an individual in North Dakota;
• an LLC in North Dakota;
• an LLC in another state;
• a corporate entity;
• a partnership; or
• Yet another special-purpose entity created to own the property.

The law is broad and covers people and businesses, but it does not clearly specify where an LLC or other business is located.

If the borrower is an out-of-state business dealing with North Dakota property by buying or refinancing it, compliance should ask DFI to confirm whether the business qualifies as a North Dakota resident under §13-04.1-02. If the property is in North Dakota, you still need to confirm the borrower’s residence unless regulators provide an exception.

Coast 2 Coast’s Company Authority is the Primary Concern

For borrowers in North Dakota, when Coast 2 Coast provides commercial financing, North Dakota usually requires a Money Broker License under Chapter 13-04.1 unless an exemption applies.

Exemptions include licensed North Dakota residential mortgage lenders, some licensed MLOs working officially, other regulated lenders, government agencies, trust companies, Farm Credit systems, banks, savings and loans, insurance companies, and credit unions. are no broad exemptions for transactions that are:

• collateralized by five or more units
• commercial
• made to an investor borrower
• a DSCR transaction
• a transaction by a private or a Non-QM lender
• originated by an individual who holds multi-state MLO licenses

or

• If Coast 2 Coast does not have North Dakota permission, compliance must find a legal exemption before moving forward.
• The MLO’s Approved-Inactive Status Does Not Allow the Transaction
• The individual has a North Dakota MLO license in the Approved-Inactive status.
• NMLS says an Approved-Inactive MLO cannot do business with that license until they have proper sponsorship.
• For this commercial transaction, the residential MLO license might not be the one that governs it.
• Approved-Inactive status does not give the right to do mortgage work regulated by North Dakota.
• The used transaction is being analyzed as a commercial money-brokering activity under NDCC Chapter 13-04.1, rather than residential mortgage origination under Chapter 13-10.
• If Coast 2 Coast has or obtains the required North Dakota Money Broker authority, compliance will need to determine which sponsorship, employment, branch, NMLS, or personnel rules apply to the person engaged in the transaction.
• The North Dakota DFI states that an MLO can only be sponsored by one North Dakota-licensed money broker.
• This shows the link between company and individual licensing for mortgages.

Brokering Seriously

• This is a serious compliance issue, not a small detail.
• North Dakota DFI has published an enforcement report against companies for engaging in unlicensed money brokering with North Dakota residents.
• According to one federal enforcement action, DFI banned a company from soliciting and brokering loans with North Dakota residents.
• DFI also ordered the subject company to pay a substantial penalty amount and imposed a cease-and-desist order.
• This highlights why it is important to wait before accepting applications, finalizing terms, or collecting fees until the company confirms it can legally handle these deals.
• Getting the North Dakota Money Broker License is usually easier than checking licensing for each deal.
• The license has a $400 application fee, a $400 annual license fee, and a $50 annual fee for each branch location.
• The licensing statute generally requires a $50,000 surety bond and a net worth of $25,000.
• DFI confirms that North Dakota does not require a physical office to obtain the Money Broker License.
• For mortgage companies working in many states, this is often the easiest and cheapest way to stay compliant.

Recommended Compliance Determination Based on What Was Viewed and Analyzed by August 25, 2026, the Recommended Position is as Follows:

Treat the eight-unit seasonal rental property as a commercial or business loan if the loan is truly for investment or business use. The North Dakota MLO license should not be used as the reason to handle this commercial deal.

• Because the North Dakota MLO license is Approved-Inactive, it should not be claimed that the person has the authority to do MLO work in North Dakota with that license.
• Determine the legal borrower and their state of residence.
• If the borrower is a person living in North Dakota, check if Coast 2 Coast has a North Dakota Money Broker License or qualifies for an exemption under NDCC §13-04.1-02.1
• If Coast 2 Coast lacks the reIf Coast 2 Coast does not have the needed authority and no exemption applies, do not accept the application, negotiate terms, broker the deal, charge fees, or do money brokering until the proper approval or license is obtained authority and no applicable exemptions exist, and the borrower is an out-of-state LLC or other non-North Dakota entity, request clarification from DFI on the application of the borrower-residence provision before proceeding.
• Make sure compensation complies with the rules and that the MLO does not initiate the transaction or directly receive the brokerage fee.

North Dakota Department of Financial Institutions, Coast 2 Coast Compliance Will Submit the Following Description of Your Situation to DFI:

Coast 2 Coast Mortgage Lending, LLC is evaluating a commercial mortgage for a business-purpose assignment secured by an eight-unit seasonal rental property/apartment in North Dakota. This property is seasonally rented and closed during the winter. This transaction is not a one- to four-unit mortgage. One of the employees involved in the transaction has an approved (inactive) North Dakota Mortgage Loan Originator license. Please advise if this transaction is money brokering under NDCC 13-04.1, if a North Dakota Money Broker License is required based on the residence of the borrower, and what company, branch, employee, sponsorship, or NMLS requirements would be applicable to the company in order to allow the company to conduct the loan, transact the loan, negotiate the loan, and broker the loan.

The North Dakota Department of Financial Institutions provides its contact information at dfi@nd.gov and (701) 328-9933.

Commercial Mortgage Explained

Commercial mortgages, like those for investment or seasonal rentals, usually do not follow the one- to four-unit residential mortgage rules. But state licensing rules may still apply.

Mortgage professionals should remember that North Dakota’s rules cover more than just residential MLO licensing. North Dakota has specific laws for commercial lending and loan brokering under its Money Brokers Act.

If the borrower lives in North Dakota, a mortgage company must have a North Dakota Money Broker license or qualify for an exemption to handle the loan. Since the company is not authorized for any North Dakota licensed activity, the safest way to comply is:

• Do not start the loan just because it is commercial or because someone has an Approved-Inactive North Dakota MLO license.
• Always check where the borrower lives, see if a North Dakota Money Broker License is needed, and whether a license or regulatory approval.
• For GCA Mortgage Forums, remember that North Dakota differs from most states in commercial lending.
• The North Dakota Money Broker License, which is not the same as the SAFE Act residential MLO license, may still be needed for commercial deals.
• This is important for loan officers who might mistakenly believe that loans with five or more units have no licensing issues.

https://janover.pro/guides/licensing-by-state

janover.pro

Commercial Mortgage Broker Licensing by State | Janover Pro

Commercial mortgage broker licensing varies by state, with most states exempting pure commercial brokering from NMLS but roughly 20 requiring some form of license or registration. Here is a state-by-state breakdown of where you need a license, where you do … Continue reading

[Max]

From what I know and hear from family, friends, real estate attorneys, realtors, mortgage loan originators, and professionals and owners of mortgage brokerage and mortgage banking shops, the mortgage and real estate industry has not been going too well since 2021. Mortgage rates have skyrocketed from a low of 2.5% to as high as 7.0%. Home prices have surged double digits every year since 2019. Property taxes and homeowners insurance have surged out of control. Homeowners association dues have doubled and tripled in many parts of the country, especially Florida. Inflation is really out of control, and it is affecting most Americans, from the minimum wage worker to the high six-figure wage earners. Six figures used to be wealthy and high-income not too long ago. However, people who make $100,000 are just barely surviving, and many are living paycheck to paycheck. The mortgage industry has lost a large percentage of its workforce. According to the NMLS, many mortgage companies, mortgage net branch, mortgage brokers, and individual mortgage loan originators have not renewed their NMLS licenses. Someone told me that half of NMLS-licensed companies and MLOs are no longer in business and have either taken early retirement or changed industries. I have been talking to MLOs and branch managers operating mortgage net branches from FDIC banks, mortgage lenders of various sizes (some one-state mom-and-pop shops, to regional mortgage brokers and bankers, to national mortgage brokerage and direct lenders), and most I speak with say they are dying. The loan applications have dried up due to affordability issues. However, I heard NEXA Lending is doing very well and expanding during this tough market. Does NEXA acquiring FSBO.COM have anything to do with benefiting MLOs at NEXA? NEXA also told its MLOs they will get paid for servicing the loans they close? How does that work for a mortgage broker and mini-correspondent lender? Also, NEXA announced they acquired UMortgage, a mortgage company with 208 NMLS-licensed MLOs? What benefits does this bring, and how much did NEXA pay for UMORTGAGE? Isn’t it dangerous for NEXA to expand like they have been doing so fast and naming a new President without experience in mortgage industry, and upper level management without the experience in the mortgage industry except maybe being a sales person loan officer? I am looking at Loan Factory, Edge Home Finance, C2 Financial, Barrett Financial Group, Coast 2 Coast Mortgage Lending, the Motto Mortgage, and several other regional and national mortgage brokers and mortgage lenders. I am also thinking about opening my own mortgage broker shop with a few colleagues of mine. I would greatly appreciate it if you can advise the pros and cons of the various mortgage companies offering independent MLO career opportunities and independent mortgage net branch opportunities. Thank you.

[Max]

Before deciding the homeowners’ fate, I would carefully review this file. There are several refinancing paths to explore, and I would focus on securing a lasting solution through a permanent refinance rather than a temporary bridge loan.

The ticking clock of the three-year note adds real urgency. Still, facing a balloon payment on a short-term note does not automatically disqualify the owners from securing new financing.

My First Move Would Be to Dig Into the Essential Financial and Credit Details

The husband requests that the new mortgage be in his name only, with the wife remaining on the deed. This structure is generally possible. Fannie Mae permits a co-owner who is not using their credit or income to remain on the title and sign the security instrument, but not the mortgage note.

Yet, There is a Crucial Detail the Husband Might Be Missing:

• If the wife is not a borrower, her income cannot be used to qualify for a standard conventional mortgage.
• This is a clear-cut case for Fannie Mae.

If an Individual’s Income, Credit, Assets, or Liabilities are Used to Qualify for the Mortgage, That Person Must Sign the Note. Use Both Approaches:

1. Husband only, using only his income and credit.
2. Husband and wife, if her income is needed.
3. Then, determine if her bankruptcy imposes a waiting period for the loan program.

Analysis of a Husband-Only Refinance Scenario

If the husband’s income, credit score, and bankruptcy history are in good shape, a husband-only refinance could solve the core issues. Typically, one spouse’s bankruptcy filing does not drag the other into bankruptcy.

While the lender will review joint finances, mortgage documents, and the title, the wife’s bankruptcy should not impede the husband’s mortgage approval.

Strong combined income, stable employment, significant equity, and low monthly obligations are positive factors for mortgage approval.

What’s missing? The husband’s qualifying income, his middle credit score, the current property value, the proposed mortgage amount, estimated monthly payments, total annual housing costs, and a year’s worth of mortgage payment history.

Here, the requested financial details matter more than the bankruptcy history itself.

FHA Financing as a Strong Option in This Scenario

If theIf the If the husband’s FICO score does not qualify for a favorable conventional mortgage, I would strongly recommend pursuing an FHA loan. FHA allows manual underwriting for applications that receive a Refer or require a manual downgrade.

HUD’s Handbook 4000.1 is the latest and controlling source for FHA underwriting. HUD last updated its handbook on August 12, 2026. borrowers with credit scores well below those customary for conventional financing.

FHA borrowers with scores of 580 or higher may be considered for financing the full amount, while borrowers with scores between 500 and 579 may be approved for a smaller amount. Equity is a major player here. Saying there’s $100,000 in equity sounds promising, but the real story lies in the loan-to-value (LTV) ratio.e (LTV) ratio.

For instance, both a borrower with a $200,000 loan on a $300,000 home and one with a $900,000 loan on a $1 million home have $100,000 in equity, yet their financial pictures are worlds apart.

Take a Look on How the Credit Union Structured the Deal

I would take a close look at how the credit union structured this deal. The borrower started with a first mortgage and a home equity loan, which the credit union later rolled into a new three-year first mortgage.

If the new loan simply pays off the existing mortgage without handing any cash to the borrowers, it does not count asd a cash-out refinancing.

The way this refinance is classified depends on the consolidation terms, the mortgage record, closing statements, notes, and payoff details.

Housing Late Payments in the Past 12 Months Would Be a Problem

This would directly affect allowable LTV and program eligibility of Gustan Cho Associates

Yes, Gustan Cho Associates does currently publish FHA and VA manual-underwriting advertisements, and Coast 2 Coast Mortgage Lending’s published licenses include Michigan.

In this scenario, the underwriting approach hinges on more than just her FICO score. Key details to spotlight: strong credit before the business failed, clear documentation of credit setbacks, both borrowers holding full-time jobs, a solid bounce-back in income, home equity, and modest current debts.

This profThis profile might not fit manual underwriting, but it stands a good chance with standard underwriting. Other key factors are the husband’s credit, job history, post-failure credit, any collections or charge-offs, reserves, debt-to-income ratio, and mortgage payment track record. The scenario requires a thorough underwriting review.

Scenario Analysis: If the Wife Must Be Included on the Mortgage

We need to know the type of bankruptcy she filed and its current status.

For conventional financing, Fannie Mae usually requires a 4-year” waiting period” after a Chapter 7 or Chapter 11 bankruptcy, with a possibility of a 2-year exception. For Chapters 11 and 13, Fannie Mae usually requires 2 years post-bankruptcy discharge and 4 years post-bankruptcy dismissal.

FHA is More Lenient on These Restrictions

For FHA manual underwriting, a Chapter 7 bankruptcy requires a two-year wait after discharge. FHA will, however, consider a case-by-case basis to remove its wait period if the period is between 12 and 24 months and the borrower can demonstrate extenuating circumstances and improved financial practices.

FHA financing is possible during a Chapter 13 bankruptcy after 12 months of satisfactory plan payments and the required bankruptcy court approval.

Even withEven with a bankruptcy in the mix, I would not rule out the possibility of FHA financing. Consider bridge funding only as a last resort. Depending on credit, property value, and investor terms, a bridge loan could be an option, but it would not be my first choice.

Saving the Primary Owner-Occupant Home

These borrowers aim to preserve their primary residence and secure long-term financing. Placing them in another short-term loan could simply postpone the current issue.

A bridge or private-money loan could serve as a temporary solution, used only if the credit union requires immediate payoff and a permanent loan cannot close in time.

However, my preferrMy preferred order of options is as follows:nance → FHA/AUS → Full-document owner-occupied Non-QM → Bridge/Private Funding if used as the temporary exit strategy.

The Non-QM option is appropriate if the husband’s credit does not meet agency standards or a recent credit event prevents approval, but there is high income and sufficient equity.

Immediate Recommended Actions for This File

Before the current lender reports a maturity default or initiates enforcement, I would gather the following: both borrowers’ mortgage credit reports, the current three-year note, payoff statement, original mortgage documents, home equity consolidation loan documents, the last twelve months of mortgage payment history, current property taxes and homeowner’s insurance, the most recent mortgage statement, an estimate of property value, both spouses’ last two pay stubs and W-2s, the last two months of bank statements, the bankruptcy petition and discharge or dismissal, and a brief written description of the failed business.

I would also request a short written extension of the maturity date from the credit union while the refinance is processed. If payments are current, a 30- to 90-day extension may be beneficial.

The Current Scenario

I would not decBased on the information provided, I would not decline this borrower. The only strategy is interesting since it may allow the husband to qualify for the mortgage without the wife’s bankruptcy. Having the wife in the title is not an issue.

The critical correction for the borrowers is this: keep the wife completely off the mortgage note but still use her $W-2 income to qualify.

If the husband’s income is sufficient, that may be the best approach. If not, I would include the wife in the analysis and determine whether FHA, conventional, or Non-QM guidelines allow her income to be used despite her bankruptcy.

Given the substantial income, equity, full-time employment, and documented credit challenges, this file should be proactively structured before foreclosure is considered.

[Max]

Very informative reply. Thank you for sharing your knowledge. Really grateful 🙏

[Max]

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https://youtu.be/YCtDXzuM0FE?si=Oqk5y57F58ITDUOH<

[Max]

Is there any AI tools that has been designed for MLOs that help us SEO and optimize our websites and social media platforms to generate organic leads and tune up our website for broken links, duplicate content, analyze for AI CONTENT vs HUMAN CONTENT and create do follow back links?

[Max]

What are the terms and rates on hard money loans on a new construction build a a single family home

Land and construction. Construction cost tentatively $125,000 and lot is $10,000. Also cost and fees.

[Max]

Great article on GCA Mortgage Forums (GCA Mortgage Forums). PLEASE TAKE A LOOK.

https://lendingnetwork.org/gca-forums/

[Max]

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https://youtu.be/lxKo-hISOO8?si=FZw4BrDWBoppqSWK