Florida HB 747 - The end of private lending in Florida?

Question

If I read this correctly, it will end the exemption for hard money/private money loans. After July 1st, anyone who wants to give a loan will need to be licensed. Getting a lender license is no joke, it's a tough process. Lots of rehabbers depending on private/hard money could be in trouble.

Has anyone else seen this bill, or know what the ramifications will be? Am I reading it wrong? It will be good for the banks and big institutional lenders, not so good for the smaller outfits and the investors depending on them.

Lenny Longo · Answer

Florida House Bill 747 is going into effect July 1st. The governor finally signed it into law. I'm going to have to put my NMLS# on everything now.

They've changed the definition of "mortgage lending" and "holding yourself out as a mortgage lender" in Florida. Basically, the legislation use to say a "mortgage loan" (for purpose of needing license) was if you were lending on a residential property that was going to be used as a dwelling of the borrower. In this new bill, they struck out the part about residence of the borrower--so there is no more loophole of using a non-owner occupied property to get around non-licensure. Any loan made on one to four-family residential dwelling "or" the land upon which such a dwelling is to be constructed is considered to be making a mortgage loan requires licensure.

As for the "holding out to the public" that's been changed to now delineate it as opposed to being ambiguous before. The only "holding out" exemption (not mortgage lending) appears to be if your lending your own money, a securities dealer or seller financing, those are still allowed per Federal Law which supersedes lil Florida. There are other exemptions it mentions but most "private lenders" will not qualify. I'm also unsure if a Reg D offering Fund would qualify.

The licenses needed. With a $250k servicing endorsement you can make loans as long as you want to for as long as you want. Still exempt if you use YOUR OWN MONEY. But you can't use your IRA money as that's not your's that's the custodians custodial account (your only the beneficiary), but you can lend your self-directed IRA money out with a bank account that matches the name of the company etc.

Interestingly, this appears to be one of the most bipartisan bills passed. The house and senate both passed it with 100% yeas 0% to nays. Even the commerce committee gave 24 (100%) yeas. The only NAY anywhere was 11 yeas to 1 nay by the Insurance and banking subcommittee.

https://www.myfloridahouse.gov/Sections/Documents/...

Lenny Longo · Answer

Good news, bill was vetoed.  You can read more here: http://www.wctv.tv/content/news/Governor-Scott-Signs-29-bills-into-law-430964823.html

Jose R Torres · Answer

It was vetoed?  That's great news!!!!

Jose R Torres · Answer

Here is the link: http://www.flgov.com/wp-content/uploads/2017/06/HB-747-Veto-Letter.pdf

John Thedford · Answer

@Lenny Longo

Yes it appears this legislation may not bode well for private lenders and HML. I am going to call the state within the next few days to see if I can get some clarification. I did talk to a company that houses 401K's and IRA's and they stated there are definite problems for some of the account holders. THEY stated that if it was not a BUSINESS, but an occasional loan (such as to a family member or friend) they believe this MIGHT be OK. If worse comes to worse, I will have to enlist the help of a licensed company to write the loans and I will fund them. I do not currently know if I can continue to write, but business loans MAY be exempt.

Lenny Longo · Answer

Hi @John Thedford

I do the same but I hold myself out to the public.

The  law changes the Florida definition of a “Mortgage Loan” from one that is “primarily for personal, family, or household use” to any loan that is secured by a mortgage on any 1-4 unit residential dwelling or any land that such a dwelling will be constructed on.  If you make a HML on a that kind of a property it's a "mortgage loan" -- they don't appear to care to what entity or person it's to, it's a residential mortgage loan.  This may bring up other issues such as TRID RESPA disclosures etc whether or not a entity is the borrower... I don't know I'm not an attorney but it's going to be interesting to see how this all plays out!

As you know, the loophole was making a loan to a borrower (person or entity) on a non-owner occupied property (residential property of 1-4 units), that would, in essence, make it NOT a residential loan by former definition.  However, the legislature struck through the law where it said "...primarily for personal, family, or household use..."  You can read it here: https://www.myfloridahouse.gov/Sections/Documents/...

But like you said, if you are using your own money and not holding yourself out you can keep lending.

Holding yourself out was always ambiguous and subject to broad definitions.  However, they have tightened that up according to the new definitions that also come into play on July 1st:

• (a) Representing to the public, through advertising or other means of communicating or providing information (including the use of business cards, stationery, brochures, signs, rate lists, or promotional items), by any medium whatsoever, that such individual can or will perform the activities described in F.S. 494.001(23).
• (b) Soliciting in a manner that would lead the intended audience to reasonably believe that such individual is in the business of performing the activities described in F.S. 494.001(23).
• (c) Maintaining a commercial business establishment at which, or premises from which, such individual regularly performs the activities described in F.S. 494.001(23) or regularly meets with current or prospective borrowers.
• (d) Advertising, soliciting, or conducting business through use of a name, trademark, service mark, trade name, Internet address, or logo which indicates or reasonably implies that the business being advertised, solicited, or conducted is the kind or character of business transacted or conducted by a licensed mortgage lender or which is likely to lead any person to believe that such business is that of a licensed mortgage lender.
• (e) Using any form promulgated by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the United States Department of Housing and Urban  Development, or the Consumer Financial Protection Bureau in performing the activities described in F.S. 494.001(23).

Again, I'm NOT an attorney so I have no clue if my interpretation of any of this is correct, but I find the subject of capital control interesting and I wonder what effect this is going to have on the hard money lenders here in Florida.

John Thedford · Answer

Correct me if I am wrong but I believe this refers to consumer loans. Those have always been subject to DF as well.

I am a HML, lending my own funds, for my benefit, and never holding myself out to the public as a mortgage lender or mortgage broker. I don't do consumer loans and don't believe this will affect what I do.

Priscilla Z. · Answer

I think it's referring to people brokering loans...

Florida HB 747 - The end of private lending in Florida?

Most Popular Reply