Hard Money Compliance: US vs Canada Compared

Understanding the Regulatory Landscape

Private lending regulation varies significantly between the United States and Canada. For lenders operating in both markets — or considering expansion — understanding these differences is critical to maintaining compliance and avoiding costly penalties.

US Hard Money Lending Regulation

Federal Requirements

At the federal level, hard money lenders must navigate:

**Dodd-Frank Act:** For consumer mortgages, lenders must comply with ability-to-repay rules, though most hard money lenders focus on commercial and investment properties that are exempt.

**HMDA Reporting:** Lenders meeting certain thresholds must report mortgage application data to regulators.

**BSA/AML Requirements:** All lenders must have anti-money laundering programs and file Suspicious Activity Reports when required.

State-Level Licensing

This is where US compliance gets complex. Requirements vary dramatically by state:

Some states require a mortgage lender license for all private lending

Others exempt commercial loans or loans above certain thresholds

Usury laws vary by state and can affect your rate structure

Some states have specific hard money lending regulations

Best Practices for US Compliance

1. Maintain state-by-state licensing tracking

2. Implement rate monitoring to ensure compliance with state usury laws

3. Document your commercial vs. consumer loan classification process

4. Maintain comprehensive audit trails for all transactions

Canadian Private Lending Regulation

Federal Framework

Canada's federal government regulates financial institutions through OSFI, but most private lenders are provincially regulated.

Provincial Licensing Requirements

**Ontario:** Private mortgage lenders must be licensed under the Mortgage Brokerages, Lenders and Administrators Act (MBLAA). This requires a mortgage administrator license for lenders servicing mortgages.

**British Columbia:** The Mortgage Brokers Act regulates mortgage brokers and lenders. Private lenders lending their own money are generally exempt, but those lending investor funds may require licensing.

**Alberta:** The Real Estate Act and Mortgage Brokers Act govern private lending activities.

MIC-Specific Considerations

Mortgage Investment Corporations (MICs) have specific regulatory requirements:

Must qualify under Section 130.1 of the Income Tax Act

Minimum 50% of assets must be in residential mortgages

Must have at least 20 shareholders

Annual reporting requirements to CRA

Key Differences: US vs. Canada

AspectUnited StatesCanada

|--------|---------------|--------|

Primary RegulatorState-levelProvincialLicensingState-by-stateProvincialConsumer ProtectionCFPB oversightProvincial consumer protectionAML RequirementsFinCENFINTRACTax ReportingIRS 1099sT5 slips

Technology Solutions for Cross-Border Compliance

Managing compliance across two countries requires robust systems. Look for lending platforms that:

Support both USD and CAD currency

Include compliance templates for US states and Canadian provinces

Automate regulatory reporting for both jurisdictions

Maintain separate audit trails for each jurisdiction

LendAutomate was built from the ground up to support both US and Canadian private lending operations, with compliance templates and reporting tools for both markets.