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Can a MLO Originate Commercial Loans in North Dakota
Have a question. If you are a licensed mortgage loan originator in multiple states and have a commercial loan (8-unit apartment building investment property) in North Dakota, can you originate that commercial loan if the residential lender you are employed with (Coast 2 Coast Mortgage Lending, LLC is not licensed in North Dakota, but the MLO is approved but inactive? From my understanding, you do not have to be licensed to originate commercial loans. Can you please give me a comprehensive answer so I can take this response to the compliance department of the mortgage lender? Thank you.
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3 Replies
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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
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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
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Your response is so confusing and does not make sense. I don’t need a book or a formal thesis that does not make any sense. I appreciate your answer; however, look at what you wrote!!!! Respectfully, it is enough to confuse a genius with a 300 IQ. Let me reword it a different way. From my knowledge, you DO NOT NEED TO BE LICENSED to originate and broker commercial loans. Any property that is not a one to four unit residential property and exceeds the number of unit of more than four units is generally a commercial loan. Let me re-ask the question. How many states in the United States require a form of licensing to originate commercial loans, and which states do not? Thank you.
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This post brings together insights on licensing rules for commercial mortgage loans in all 50 states, highlighting the difference between true five-or-more-unit commercial loans and those that fall under residential MLO licensing.
Licensing Requirements for Initiating Commercial Mortgage Loans
Mortgage loan originators often ask if they need a state MLO license to arrange a commercial mortgage loan. In most states, the answer is no as long as the loan meets the state’s definition of commercial and is not seen as residential.
Federal rules say mortgage loan originator licensing mainly applies to loans backed by properties with one to four units.
Real Estate Loans with Five or More Multi-Family Units
Loans on properties with five or more units are usually considered commercial or multifamily loans rather than residential loans. This difference matters. While a state MLO license is usually needed for loans on one- to four-unit homes, it is not automatically required for commercial properties with five or more units.
Knowing your state’s laws is very important. Most states do not require an MLO license for commercial mortgage origination, but some have special rules for commercial mortgage brokering and lending.
It is wrong to say commercial mortgages never need a license. While most states do not require a residential MLO license for commercial deals, some still need extra licensing or registration. Our research reveals that about 34 states do not require a special commercial mortgage broker license for standard five-or-more-unit commercial deals.
States That Require Licensing to Originate Commercial Loans: 18 States
In roughly 16 states, you must check licensing, registration, or other state-specific rules before brokering a commercial mortgage loan.
Of the 16 states mentioned, about 11 require licensing or registration before doing commercial mortgage brokerage. The other 5 decide on a case-by-case basis, depending on borrower type, loan size, lender, payment, and exemptions.
A broker does not need a residential MLO license to handle a true commercial mortgage deal. However, it is very important to check all state commercial lending laws before working in a new state.
States That Generally Do Not Require a Special Commercial Mortgage Broker LicenseFor a Traditional Business-Purpose Mortgage That is Secured by a Commercial Real Estate Property or a Property Containing Five or More Residential Units, the Following States Generally Do Not Require a Special Commercial Mortgage Broker License:
- Alabama
- Alaska
- Arkansas
- Colorado
- Connecticut
- Delaware
- Georgia
- Hawaii
- Idaho
- Indiana
- Iowa
- Kansas
- Kentucky
- Maine
- Maryland
- Massachusetts
- Mississippi
- Missouri
- Montana
- New Hampshire
- New Mexico
- Ohio
- Oklahoma
- Oregon, Rhode Island
- South Carolina
- Tennessee
- Texas
- Utah
- Virginia
- Washington
- West Virginia
- Wisconsin
- Wyoming.
In these states, mortgage professionals usually do not need a standard mortgage lender license to arrange financing for commercial properties with five or more units.
Even if a special commercial mortgage broker license is not required, mortgage professionals must still comply with other laws, such as business registration, commercial financing disclosures, foreign company rules, interest rate limits, lender and servicing rules, advertising laws, and other state-specific regulations.
States Where Commercial Mortgage Licensing or Registration Should Be Checked
In some states, assuming that commercial mortgage brokerage never requires a license can lead to errors. These states have specific laws and licensing systems for commercial mortgage brokers.
California has the option of regulating a commercial transaction under the California Financing Law or through its real estate licensing system.
Michigan has the option to regulate the mortgage broker activities through its real estate broker licensing acts. Minnesota will also consider real estate broker licensing acts for certain commercial mortgage financing negotiations. Nebraska has a structured system for regulating loan brokers that applies to most commercial financing activities, unless an exemption applies.
States with Separate Regulatory System for Certain Commercial Real Estate Activities
Nevada has a separate regulatory system for certain commercial real estate mortgage activities, which should be reviewed before engaging in a transaction. New Jersey also requires real estate broker licensing for many types of commercial mortgage transactions.
New York will consider a person negotiating a mortgage secured by real property to be subject to real estate broker licensing requirements, even if the mortgage is not a residential mortgage.
North Carolina has a separate Loan Broker system. A person arranging commercial financing should evaluate whether he or she is required to register or is exempt before conducting the activity in North Carolina. Pennsylvania will also regulate the negotiation of real property finance through its real estate broker licensing acts. South Dakota regulates real estate and non-residential mortgage financing under separate systems. Mortgage professionals should review applicable regulations, even for properties with more than four units. These examples prove that thinking ‘commercial mortgages never need licenses’ can create compliance headaches. Even if a residential MLO license is not needed, other licenses or registrations might be.
States Where the Answer is Situational
Some states look at licensing on a case-by-case basis rather than a simple yes-or-no. Whether a license is needed depends on whether the borrower is an individual or a business and whether the lender is a formal institution. For example, a commercial mortgage to an LLC might need a license, but one to an individual might not.
Illinois has a Loan Brokers Act; however, exemptions apply if the broker charges a broker fee only after the financing is secured and no other broker fees or expenses are charged.
Many commercial mortgage brokers charge compensation in a similar way. Louisiana has a similar system. Individuals whose compensation is fully contingent on securing financing from a third-party lender may qualify for an exemption from loan broker registration requirements.
States with Licensing Laws Based on Value of Commercial Property
Vermont’s licensing laws also contain similar exemptions. For example, commercial loans that are $1 million or more may be treated differently from smaller commercial loans.
North Dakota is unique because it treats “money brokering” separately from other financial transactions. Although North Dakota’s Money Brokers Act does not cover residential mortgage transactions, both commercial lending and commercial loan brokering fall within the law’s jurisdiction.
In these states, licensing rules depend on more than just the number of units. Who the borrower is, the loan amount, lender type, payment method, and the broker’s role all matter.
What Defines a Five-or-More-Unit Property as Commercial?
Mortgages for apartment buildings with more than four units are not considered standard residential one- to four-unit mortgages. A lender who makes a loan on a duplex is still dealing with a residential mortgage, not a commercial or multifamily mortgage.
So, an eight-unit apartment building is classified as a commercial multifamily property. Whether the building is used all year or only part of the year does not change its classification.
An eight-unit apartment building used seasonally is still commercial. Seasonal use might affect loan approval, value, reserves, cash flow, payments, and insurance, but it does not make the property residential.
Two Distinct Questions: Residential MLO Licensing and Commercial LicensingThis is the Most Important Distinction for Mortgage Loan Officers to Understand:Is the Transaction a Residential Mortgage Transaction? Do I Need an MLO License?
For a true five-or-more-unit commercial property, the answer is usually no.
- The next step is to check if the state has its own rules for commercial mortgage, money, or loan brokers, lenders, or real estate financing brokers.
- This varies from state to state.
- A person may correctly say, “I don’t need a residential MLO license to make this eight-unit apartment loan,” but must also check if a separate commercial lending or brokerage license is needed.
- These are two completely different types of licenses.
What Does An Approved-Inactive Residential MLO License Mean?
An approved-inactive residential MLO license does not permit activities that require an active residential MLO license. In a bona fide commercial mortgage transaction where an MLO license is not needed, an approved but inactive residential MLO license would not prohibit someone from working on the transaction.
For example, an eight-unit investment property is not considered residential. In this case, the key question is whether the company and the individual comply with state laws governing commercial lending, money brokers, loan brokers, and real estate brokers. An approved-inactive residential MLO license does not stop all commercial lending, but it does not allow commercial lending in states that require a separate commercial license.
North Dakota Illustrates the Importance of Distinguishing Residential and Commercial Lending Licenses when Dealing with Mortgage Loans
According to North Dakota, distinguishing between residential MLO lending and commercial lending is necessary.
A building with eight units is classified as multifamily, not residential. The residential MLO license is not the primary concern in this case.
In North Dakota, there is a separate Act, the Money Brokers Act, to regulate and license commercial financing activities. Owning an eight-unit property does not automatically allow a mortgage broker to work in North Dakota.
The broker does not need an active license to close a commercial mortgage, but the company must comply with the Money Brokers Act. This sums up the challenge North Dakota presents. An eight-unit property counts as commercial, so a residential MLO license is not needed for loans secured by it. However, North Dakota’s separate law for commercial money brokering means the company’s authority must be checked.
Can a Licensed Residential Mortgage Loan Originator Broker Commercial Loans?
Usually, yes. A licensed residential mortgage originator can work in the commercial mortgage market if both the employer and the state give the green light. A residential MLO license is only one part of the process. Company rules—such as insurance, lender agreements, payments, branch approvals, accounting, and compliance—can also determine whether a loan officer can handle a commercial deal.
For properties with five or more residential units, treat the deal as commercial or multifamily financing. An MLO license is not needed to broker a true commercial property.
Always get company approval before proceeding, even if the state does not require a license. Mortgage loan officers. The rules for mortgage loan officers are actually quite straightforward. For one- to four-unit residential properties, the first step is to address the residential mortgage and MLO licensing.
States That Do Not Require a Commercial Broker License for Standard-Purpose Commercial Real Estate Deals
In approximately in about 34 states, you do not need a commercial mortgage broker license for standard business-purpose commercial real estate deals. In 16 states, transactions must be checked for licensing, registration, or exemption requirements before obtaining any required commercial mortgage broker, money broker, loan broker, real estate broker, or financing license. uses its own words and terms for these licenses.
Observations are mostly correct. Usually, you do not need a traditional residential Mortgage Loan Originator license to originate or broker a true commercial mortgage loan on a property with at least five units.
About 34 states let you handle standard commercial mortgage broker activity without a special license, while around 16 states require a license or an exemption review before you start. Focus on how the property is classified, not just the loan officer’s residential MLO license. If the property is truly commercial and has at least five units, check whether the state has separate rules for commercial mortgage brokers, money brokers, loan brokers, or real estate financing.
For an eight-unit apartment building, the loan will almost always be a commercial loan. The main thing to check is not residential MLO licensing, but whether the state has its own rules for commercial lending and brokering.
https://gustancho.com/commercial-loans/
Compliance Disclaimer
This information is for educational purposes related to the mortgage industry and general compliance discussions. Exemptions vary depending on the borrower, lender, loan amount, compensation, property type, and whether the company is acting as a lender or a broker. Rules governing state licensure of mortgage lending change frequently. Whether a company meets the requirements to legally make commercial loans in a state where it does not normally conduct business is something each company must decide for itself. It is advised that companies contact their licensed compliance advisors to learn of the current market requirements.
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