Hard Money Lending in Florida: New Bill Proposed

[Scott Hollister]

Hello BP, 

My mother moved down to Florida a few months ago to continue working in the hard money area as an operations manager. She asked me to reach out to the Florida investors that use hard money. Below is copied from the email: 

I want to alert you to a bill passed by the Florida legislature that will virtually kill private hard money lending in the State. Now private lenders can lend on non-owner occupied property of 1-4 units. The new law will do away with this exemption. It will be extremely difficult for any investor to find a hard money loan.

The banks and institutional lenders are trying to put the small, private hard money lenders out of business. We need to ask Governor Scott to veto HB 747. This is urgent- if not vetoed by June 29, it will become law.

Call Kevin Reilly, Director of Legislative Affairs. Tell him you want Governor Scott to veto HB 747. Call Governor Scott. Leave a detailed message. We need to get this done before Tuesday. 

A bill that currently awaits Gov. Scott’s review, if not vetoed, would greatly inhibit private lenders from providing loans on investment properties. HB 747 was passed by the Florida Legislature this session with the intent to allow securities dealers and investment advisers to make loans without a license. But another clause would virtually shut down private lenders – a critical source of capital for many real estate investors.

HB 747 removes the exemption to the Florida mortgage licensing law that permitted private lenders to loan on 1-4 family housing units that are not owner occupied --- i.e. investment property (by deleting language that was always in the Florida mortgage law that excluded loans ‘primarily for personal, family or household use’ from the definition of a mortgage).

The majority of states have exemptions to allow for private mortgage lending because the federal mortgage regulations – if left on their own – would kill the small business lending economy. These private lenders utilize 401Ks, IRAs and other retirement funds to finance other like-minded entrepreneurs.

It is important to know that Federal mortgage regulations exempt "loans primarily for personal, family or household use". So with HB 747, Florida will become a state with much more stringent regulations than even the Feds, and that is even after the job killing Dodd-Frank amendments!

Since the housing crash of 2008, private lenders have played a large role in the state’s real estate recovery. These lenders have stepped in to fill the gap left by banks and other institutional lenders who are either unwilling or unable to provide financing for foreclosed and/or distressed properties. They are also the ones creating new jobs in building and construction, and revitalizing neighborhoods that would otherwise sit in decay and disrepair.

If this bill could be so crippling to lenders, investors and allied job creation, why did it pass unanimously in the FL legislature? The simplest answer is that they misunderstood the implications that this clause would have for our real estate market and overall economy.

Please ask Governor Scott to veto this bill and allow small investors to continue rehabilitating the residential real estate market in Florida. Let him know how this bill would stifle job creation, inhibit entrepreneurship and cut-off the most essential capital to one of our state’s chief economic engines.

Thanks for your time and best of success with your real estate investing!