State reference
Hard money lending in Montana
Hard money lending in Montana: licensing requirements, what decides whether your rate is lawful, federal preemption and how long deals take.
MONTANA
Business-purpose lending sits outside the licensing statute
The state's mortgage licensing statute is keyed to loans made primarily for personal, family or household use. A genuine business-purpose loan to an entity, secured by investment property, falls outside that definition, which is why unlicensed private lenders operate lawfully here. Two cautions: the business-purpose characterisation has to be real rather than a label on the paperwork, and lending to a natural person for personal use is licensed. Other statutes - usury, broker licensing, servicing - can still apply.
This page covers four things about borrowing hard money in Montana: whether the lender needs a licence, what actually decides whether your rate is lawful, how federal preemption interacts with it, and how long deals take here. Every figure shows the statute or dataset it came from.
Does a lender need a licence in Montana?
Mont. Code §32-9-103 defines a residential mortgage loan as one "primarily for personal, family, or household use" secured by a dwelling or Montana residential real estate. Montana goes further than most and exempts, at §32-9-104, an entity engaged solely in commercial real estate lending - note the word solely, and note that Montana requires proof of exemption rather than a bare assertion.
What decides whether a rate is legal in Montana
Almost every site publishing on this topic gives you one number per state. That number is close to meaningless on its own. A rate that is lawful for one lender in Montana can be unlawful for another on the same day, on the same property, because four separate questions decide which body of law applies to your loan.
| Gate | The question |
|---|---|
| Purpose | Is the loan for a business, commercial or investment purpose, or for personal, family or household use? |
| Borrower | Are you borrowing as a natural person, or as an LLC, corporation or partnership? |
| Lender | Is the lender licensed, and under which statute? |
| Lien position | Is the loan secured by a first lien on residential real property? |
- Purpose
- Many states remove the usury defence entirely for business-purpose loans. Washington is the clean example: under RCW 19.52.080 a borrower on a loan made primarily for a commercial, agricultural, investment or business purpose may not claim a defence of usury. This is why every hard money lender makes you sign a business-purpose affidavit.
- Borrower
- Several states exempt entity borrowers from some or all of the cap. In New York a corporation or LLC cannot assert the 16% civil usury defence at all, though the 25% criminal ceiling still applies. This is the other half of why lenders insist on title vesting in an LLC.
- Lender
- Licensed lenders frequently operate under their own rate statute rather than the general cap. California is the sharpest case: a loan made or arranged by a licensed real estate broker and secured by real property is exempt from the constitutional rate limit outright, under Civil Code §1916.1.
- Lien position
- If it is, federal law may preempt the state rate limit entirely under 12 U.S.C. §1735f-7a. A great many hard money loans are first-lien residential, so this gate is live far more often than borrowers realise.
Rate limits in Montana
That is a gap in our research, not a finding that Montana has no limit. Do not read it as one.
The four gates above still tell you what to ask. Take the answers to them, then put the question to the regulator directly:
I am a borrower considering a business-purpose loan secured by a first lien on residential investment property in Montana, borrowing through an LLC. Which statute sets the maximum lawful interest rate for that loan, and does the business-purpose or entity-borrower status change the answer?
Ask the Montana Division of Banking and Financial Institutions
Federal preemption, and the distinction nearly everyone gets wrong
Two different provisions of the Depository Institutions Deregulation and Monetary Control Act of 1980 are routinely written about as if they were one. They are not, and only one of them normally touches a hard money loan.
- Section 501 — 12 U.S.C. §1735f-7a
- Preempts state limits on the rate, discount points, finance charges and other charges on a loan secured by a first lien on residential real property, made after 31 March 1980, that meets the federally related mortgage loan definition. This one can apply to hard money, because a great many hard money loans are exactly that. States had until 1 April 1983 to opt out.
- Section 521 — 12 U.S.C. §1831d
- Lets federally insured state-chartered banks charge the rate allowed where the bank is located, and export it. Hard money lenders are generally not banks, so this provision usually has nothing to do with your loan, despite how often it is cited in articles about private lending.
Who supervises this in Montana
Montana Division of Banking and Financial Institutions. Regulator names change; the CSBS directory is the authoritative list, and NMLS Consumer Access is where you check a specific company for free.
Before you sign in Montana
- Confirm the licence, or confirm on the record that none is required for this loan type. How to verify a lender.
- Establish which of the four gates your loan goes through, because that decides which rate limit applies.
- Score your term sheet against the 14 red flags.
- Price the loan on total cost, not rate. True-cost calculator.