A client wants me servicing a wrap. My setup may not carry it.

Third option, obviously. You refer the payment side to a servicer, you stay the person who set it up, and you don't touch the note. The client called you because he trusts you, and you can spend that trust by pointing him somewhere good rather than by doing something you've never done. I've had a servicer on a small carry note for two years and the whole value of it is that they are boring and not me.

Your problem 2 is the real one and it doesn't go away in any of the three options. You're managing the collateral for the borrower while owing information to the lender. If the buyer stops maintaining the roof, do you tell the seller? He holds the paper on a building he can't inspect. Get that written down either way, because the day it matters is the day somebody accuses you of having known.

Question before you go further. Does the buyer know you're being paid by the seller to remit the underlying payment? Because from the buyer's seat, their property manager also works for their lender, and if they find that out in month fourteen rather than at signing you've got a problem that isn't about licensing at all. I'd want that disclosed in writing to both parties, and I'd want the buyer to say yes in a document.

Your arithmetic checks. 630k at 7.25% over 30 years is about 4,297. The underlying at 412k and 4.1%, depending on how many years are already amortized, lands near 2,150 if the original term was 30 years and he's a few years in. Spread of roughly 2,145 a month, so about 25 to 26k a year, and it stays flat, because both notes are fixed rate with fixed payments and the cash difference never changes. Your 28k is the year one interest spread rather than the cash spread, and that interest spread drifts slightly down over the term rather than up. On an interest basis it's about 28.7k in year one and closer to 28.5k by year four.

On the licensing question you're already doing the right thing, which is asking an attorney in your state. Requirements for who may collect and disburse on a mortgage note differ state to state and some states treat third party note collection as an activity needing its own license or exemption. Nobody here should be telling you where your state lands.

The economics answer your other question. A specialist quoting 30 to 45 has amortization, interest allocation for year end reporting, and a compliance posture already built. You would be building all three to earn 780 a year on one file, and the marginal cost of your first mistake on interest allocation exceeds the annual revenue.

What actually has value in this deal is the thing @anchor is pointing at. You sit between a lender and a borrower who both rely on you for different information about the same building. Whether you service the note or not, that conflict exists the moment you manage the property for the buyer. Price the management engagement with a written disclosure of your relationship to the seller and get both signatures. That is the part a servicer cannot do for you.

Look at the five year balloon before you decide how long this relationship lasts. On 630k at 7.25%, the buyer will have paid the balance down to roughly 590k by year five. If they can't refinance, the seller is either extending or foreclosing, and either way your servicing fee and probably your management contract end in a mess. Five years of 780 is 3,900 gross. Weigh it against being the person standing there when it unwinds.

Why is the seller carrying at 7.25 when he could have taken 690 cash and been done? Genuinely asking, I'm not seeing the motivation clearly enough to trust the rest of the structure.

@pike, because 630k at 7.25% against 412k at 4.1% pays him around 2,100 a month on 218k of equity he'd otherwise have to redeploy at whatever the market gives him. That's the whole point of a wrap. He's earning on the bank's money as well as his own.

@cobalt, on your item 3, the 1098 issue is bigger than it sounds. Somebody has to allocate every payment between interest and principal correctly for the entire term, and if there's a balloon the schedule doesn't behave like a clean 30 year. A servicer produces that document. A spreadsheet you maintain produces a document you get to defend. Reporting requirements on seller carried paper vary and his accountant should be the one telling him what he owes, but you don't want to be the source of the numbers unless you're built for it.

Reading through this the thing I'd want, if I were the buyer, is proof each month that the underlying loan actually got paid. Not a statement from the servicer saying they remitted. Evidence from the senior lender. @cobalt if you end up anywhere near this, make that a deliverable in whatever agreement gets written, because the buyer's whole downside is finding out in month twenty that the payments stopped going through.