Ruling on lender-health data secrecy to get second look

With controversy starting to emerge, the Nevada attorney general's office said Friday it will review its opinion on the secrecy of findings about the financial health of private lenders.

The controversy stems from a request that the Review-Journal made in June, seeking disclosure of the grades that the Mortgage Lending Division gave private lenders based on state examinations of the firms' financial books and records.

In a letter dated July 23 that denied the Review-Journal request, Deputy Attorney General Richard Dreitzer said the records are secret under state law. Further, he argued that the law was in the public's interest.

Assemblyman Joe Hogan, D-Las Vegas, challenged the opinion, saying that people need that type of information before investing with private lenders.

Hogan wrote to Attorney General Attorney General Catherine Cortez Masto and asked her to support a bill to change the law and make exam grades public information.

Nichole Moon, a spokeswoman for the attorney general, on Friday declined to comment on Hogan's request. But Moon clarified her opinion against releasing the exam results.

Moon said that Dreitzer wrote the opinion at the request of his client, outgoing Mortgage Lending Commissioner Scott Bice.

Moon said the attorney general's office will review the decision when a new commissioner is appointed following Bice's last day on Tuesday.

Bice's rejection of the newspaper request for information stands, pending the future review, Moon said. Dreitzer's opinion supporting the denial also remains in place while awaiting the new commissioner, she said.

The issue revolves around private lenders, sometimes called hard-money lenders, who solicit investments from individuals for short-term mortgage loans to developers. These short-term mortgages generally yield 12 percent or higher interest rates, making them attractive to retirees trying to live on Social Security benefits and bank savings.

Yet, a series of private lenders have collapsed in recent years, leading to allegations of fraud and mismanagement.

USA Capital, for example, became insolvent last year while holding $962 million for 6,000 investors.

Hogan reasoned that people could benefit from reviewing the grade, a numerical ranking of 1 through 5 with 1 being the best, that the Mortgage Lending Division gives to private lenders after annual exams.

Hogan said he did not object to the attorney general office's opinion that state law makes those grades secret. The assemblyman, however, said he was stunned that the deputy attorney general went beyond a legal interpretation and argued that the secrecy provision was a good law.

"That was unbelievable -- amazing," Hogan said. "The public really does not have just a right but also a need to know. "

Dreitzer, however, argued that it was in the public interest to keep the private lender grades secret.

"In light of the fierce competition within the mortgage industry at this time public disclosure of the (exams results) might be seized upon by industry competitors in order to paint a particular broker in a misleadingly flattering or less than flattering manner."