Assembly Speaker Barbara Buckley, D-Las Vegas, on Wednesday backed a bill that would give investors access to regulatory ratings and examination results on hard-money lenders.
With the exception of a hard-money lender, participants in an Assembly Commerce hearing generally spoke in favor of the bill.
The measure, Assembly Bill 144, would strike a provision that allows the state Mortgage Lending Division commissioner to keep secret the ratings and exams that could affect the welfare of the rating of 25 hard-money lenders or would give one a competitive advantage. Under the bill, the commissioner would be required to release the information to the public.
Hard-money lenders, sometimes called private lenders, solicit money from individual investors and use the money to make short-term mortgage loans secured by real estate. Many retirees have been attracted to the loan investments because they often can earn interest of 12 percent or higher.
Yet a series of hard-money lenders have became insolvent in recent years, including USA Capital, which was managing almost a billion dollars for 6,000 investors when it failed in 2006.
Assemblyman Joe Hogan, D-Las Vegas, lead sponsor for the bill, said he wanted investors to see the regulatory grades that the Mortgage Lending Division gives hard-money lenders. That would allow investors to make informed decisions.
The bill also would enable investors to obtain copies of division exams of lenders going back up to five years.
“My initial inclination is that this should be available to the public,” Buckley said. “It’s kind of a consumer protection issue.”
Hogan’s bill is a “way to police the industry without an infusion of taxpayer dollars,” Buckley said.
But Corinne Dale, president of Capella Commercial Mortgage, objected to disclosing state ratings on a hard-money lender unless it has encountered problems.
Investors would not understand some of the complex analysis in examination findings, Dale said. She objected to requirements that appraisals or summaries of the analysis of real estate valuations be disclosed to investors.
David Goldwater, president of Goldwater Capital Nevada and a former assemblyman who sponsored past reform legislation on hard-money lenders, supported the bill in concept.
AARP and the Nevada Press Association backed the bill.
Bob Day, a 70-year-old Henderson retiree and investor in hard-money loans, said: “These things that (Hogan) is suggesting are very good, but they come a little late. All of these mortgage lenders are being exposed for all of their dirty dealings.”
Contact reporter John G. Edwards at firstname.lastname@example.org or 702-383-0420.