Legislative Advocacy for the Private Lending Industry
A Focus on National, California and East Coast Legislation
By Amy Kame
The National Private Lenders Association (NPLA) is committed to protecting the interests of the private lending industry. Through strategic partnerships with the Mortgage Bankers Association (MBA) and various state associations, the NPLA ensures that its members are well-informed and actively involved in the legislative processes that impact their businesses. As part of this initiative, the NPLA holds bi-weekly meetings with its members, providing crucial updates on legislation and other important matters. These meetings empower members with the knowledge and resources they need to navigate the legal landscape effectively.
The NPLA’s Mid-Year Legislative Update 2024
In the most recent NPLA meeting, members received a comprehensive national legislative update from the Mortgage Bankers Association (MBA), a California-specific legislative update from Robert Finlay of Wright, Finlay, and Zak LLP, and an East Coast legislative update from Jon Hornik of Private Lender Law.
National Legislative Update
Stephanie Milner, Associate Vice President, and Liz Facemire, Director of State Government Affairs at MBA, provided insights into the main issues and trends at the local and state levels impacting commercial real estate and NPLA members. The key areas of focus included:
Building Performance Standards // Regulations mandating energy usage and greenhouse gas emissions for buildings. Local Law 97 in NYC has begun implementation, with penalties starting in 2030. MBA is working on an advocacy primer to guide policymakers.
Good Cause Eviction // Laws listing reasons for eviction, potentially conflicting with existing landlord-tenant laws. MBA has successfully opposed such laws in several states but faces challenges in New York, where localities must opt-in.
Rent Control // Policies that negatively impact the supply of affordable housing. MBA has opposed rent control proposals in states like Colorado and Nevada and continues to combat these policies.
Licensing Concerns // In South Dakota, non-bank lenders were subjected to federal anti-money-laundering laws. MBA’s intervention led to the memo being rescinded.
Foreign Ownership // Numerous bills across the U.S. aim to restrict foreign ownership of land, impacting commercial development. MBA monitors and opposes overly restrictive applications.
Investment Equity Ownership // Legislation limiting large investment firms’ ownership of residential homes could affect the supply of multifamily property. MBA is vigilant in addressing these trends.
These updates reflect the MBA’s extensive efforts to advocate for policies that support the stability and growth of the private lending industry. Their proactive approach ensures that NPLA members are well-informed and prepared to address these evolving legislative challenges. The NPLA and MBA meet monthly to discuss legislation, trends we are seeing, and ways we can partner to ensure our members are equipped to navigate their businesses effectively in a constantly changing regulatory environment.
California Legislative Report
Robert Finlay, Partner at Wright, Finlay & Zak, LLP, and Co-Chair of the NPLA’s Legislative Committee, updated members on California-specific legislation affecting the commercial lending industry. Notable updates include:
Investment Ownership Restrictions // SB1212 — Prevented investment entities from buying real estate after January 1, 2023. It was quickly shot down.
AB2584 — Limited business entities to own no more than 1,000 single-family units. Defeated with the help of the California MBA.
AB1133 — Restricted home builders from selling multiple residential units to one owner. Also shot down.
Foreclosure Limitations // AB2024 — Likely to extend the foreclosure process by adding 90 days through extensions tied to listing agreements and signed sales agreements. Effective January 1, 2025.
Commercial Tenant Protections // SB1103 — Aimed to extend residential tenant protections to commercial tenants. MBA remains optimistic about defeating it.
Mortgage Interest Deduction // AB1932 and AB2616 — Proposed limiting the mortgage interest deduction to primary residences, excluding investment properties. Opposed by MBA due to negative impacts on fix-and-flip lenders.
Debt Collection Practices // AB1286 — Expanded the Rosenthal Fair Debt Collection Practices Act to cover small business debt and loan guarantees. Still being fought by MBA.
Fix-and-Flip Regulations // AB968 — Requires fix-and-flippers to disclose all repairs and permits, effective July 1, 2024, increasing costs and delays for flippers.
Usury Law Modifications // SB1146 — Clarifies that forbearance, extensions, or modifications of loans by licensed brokers do not violate usury laws. Helps consumers and lenders.
With the support of the California MBA, significant strides have been made to protect investment ownership and streamline foreclosure processes, ensuring that NPLA members can operate effectively. California is often considered a bellwether state, meaning that its legislative trends frequently set the precedent for other states across the country. This status poses a risk to NPLA members because laws enacted in California can influence similar legislation in other states.
For example, if California implements stringent regulations on investment ownership or foreclosure processes, other states will likely observe these developments and
potentially adopt comparable measures.
This ripple effect can create a challenging regulatory environment for private lenders nationwide. By understanding and addressing California’s legislative landscape, NPLA members can better anticipate and prepare for similar changes in other states. Proactive advocacy and strategic planning are essential to mitigating the broader impact of California’s legislative trends on the private lending industry.
East Coast Legislative Report
Jon Hornik of Private Lender Law provided updates on East Coast legislation, focusing on rent control expansion, foreclosure rights limitations, and enhanced borrower protections:
Covered legislation included:
New York // Bill A10210 — Extends existing rent control laws until June 30, 2027.
New Jersey // Bill 5595 — Expands the Residential Foreclosure Prevention Program.
Bill A819 — Requires maintaining age-restricted housing during foreclosure.
Bill A2269 — Expands eligibility in foreclosure actions for properties sold below fair market value.
Bill A2535 — Amends the Fair Foreclosure Act, adding a private right of action for violations.
Bill A3154 — Provides a 6-month forbearance for high-risk mortgage loans, halting foreclosure and freezing interest rates during this period.
The legislative updates from the East Coast highlight areas of concern for private lenders, including rent control and foreclosure processes. The recent changes to foreclosure laws in New Jersey can significantly impact lenders by delaying the recovery of their investments. Extended foreclosure timelines and new procedural requirements mean that lenders might face longer periods before they can resolve foreclosure proceedings and reclaim their funds. Understanding these legislative changes helps NPLA members prepare for these extended timelines and manage the potential impacts on their portfolios.
By staying informed and adjusting their risk management and financial strategies accordingly, lenders can better navigate the challenges posed by these evolving regulatory landscapes, ensuring they remain resilient and proactive in their business operations.
The collaborative efforts between the NPLA and our partner organizations will continue to grow as we remain proactive in addressing legislative changes that impact the private lending industry.
Legislative Tracking for Members
The NPLA offers a legislative and regulatory tracking link where members can submit legislation observed in their states or local municipalities. This tool keeps all members informed of legislative developments, ensuring proactive advocacy for the private lending community.
Join the NPLA to stay updated on crucial legislative developments and become part of a community dedicated to protecting the interests of private lenders, capital providers, brokers, and real estate service providers nationwide.
If you are interested in joining the NPLA at our next conference, you can register here: https://nplaconference.com/october-2024-event-registration/
This is a great opportunity to network and engage with the Private Lending industry in Austin, Texas, from October 27th -29th at the Fairmont Hotel.
