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R.L. Wickman & Associates, Inc. v. Kennedy Funding, Inc.

97-670 (U.S. Dist. Ct. D. N.J. 1998) (Unpublished)

MORTGAGES; BROKERS; COMMISSIONS—A lender that negotiates for a mortgage loan participation with another lender is not required to be licenced as a real estate broker.

A borrower obtained a mortgage loan commitment wherein the lender “guarantee[d] full performance of the terms of the loan, including all payment advances to Borrower.” Half of the non-refundable commitment fee was paid upon signing (together with a small preparation fee); the remaining half was payable upon closing or upon the borrower’s election not to proceed. When the lender determined that it could not fund the loan itself, it arranged for a co-lender to participate in the loan. Unfortunately, six days before the scheduled closing, the co-lender pulled out. The borrower sued for alleged damages, and the lender counterclaimed for the balance of the commitment fee.

In the course of the litigation, the borrower sought to amend its pleadings to add a defense based upon N.J.S. 45:15-3, which precludes one without a real estate brokerage license from collecting compensation for “attempting ... to negotiate a loan” in a real estate transaction. The borrower’s theory was that the lender “negotiated a loan” with the co-lender, but did not have a real estate brokerage license. The Magistrate denied the borrower’s attempt to amend its pleadings because to do so, relying on the statute, would be futile. The District Court agreed.

In the Court’s view, the lender was acting as such, and not as a broker. It rejected a broad reading of the word, “negotiate,” rejecting the borrower’s theory that the transaction between the lender and the co-lender fell within the ambit of the statute. The commitment fee was found to be paid in return for the lender’s “guarantee” to perform the terms of the loan, and to provide the funds and the due diligence expenses. Since the lender was not acting as a broker and did not “negotiate” a loan for the borrower, a defense based upon the statute would be futile.


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