National Private Lenders Association
Pushing Boundaries, Protecting Investors and Representing the Industry
By Carole VanSickle Ellis
One of the earliest documented examples of private lending dates back to roughly 2,000 B.C., when a Mesopotamian farmer borrowed money against the seeds he had planted and promised to pay back the loan with seeds yielded when his new crop bore fruit. The enterprise must have been successful for the farmer and his unnamed lender because there are many examples of this type of transaction documented from that point forward.
As the fledgling lending industry evolved, livestock loans became a popular product as well, with the loan being repaid upon the birth of the first viable baby animal. From the beginning, private lending has hinged upon the ability of a borrower and a lender to agree upon a collateral and repayment system that meets the needs of both.
Over the centuries, however, private lenders have developed something of a cutthroat reputation that has damaged their ability to support and enhance the businesses and investments of their borrowers. To Jeff Tennyson, president and CEO of private lender Lima One Capital and chairman of the National Private Lenders Association (NPLA) Advisory Council, the industry stood in clear need of strong, positive representation and guidance when NPLA entered the scene in 2019.
“We had reached the point where people looked at private lending as aggressive, and the use of the term ‘hard money’ just demonstrates that idea,” Tennyson said. “As a private lender with Lima One, I’m proud of our industry because we improve neighborhoods so that families can live the American dream. It’s a noble purpose because there is no other type of loan in the industry that can improve the living experience of so many families and communities.”
Tennyson and the roughly two dozen other founding members of the association believe that the best way to create positive outcomes for private lenders and their borrowers is to have a set of standards to which the industry is held. This means, Tennyson explained, that private lending needed a trade organization similar to that of any other industry in order to “become more of a professional mortgage origination” sector with professional standards, best practices, and ethical standards.
“It is important that we move away from what the industry has known as ‘hard money’ lenders and become more the professional mortgage originators that help real estate investors be more efficient in their real estate projects and successful in their businesses,” he said.
Jon Hornik, partner and chair at Private Lender Law Group, LHRG, LLP, and also a founding member, executive director, and general counsel for NPLA, elaborated. “Before the inception of NPLA, there was a void in the private lending world,” he said. “Before NPLA, private lenders’ interests were not appropriately represented at a state or federal level in terms of having our voices heard.”
For example, Hornik explained many laws that appear to solve a real estate-related problem such as rising foreclosures or housing affordability actually exacerbate both the initial problem and the ability of the industry to resolve it. NPLA, he said, both educates lenders on creative and groundbreaking ways to work with borrowers and investors in order to avoid pitfalls and uses best practices and ensures that the “voice” of the private lending sector is heard at both state and federal levels.
“What we have done,” he said, “is create an environment where lenders, big and small, in this space are sharing information with each other in a close, confidential way. That is making everybody who is listening smarter and better at their business.” NPLA hosts bi-weekly Zoom calls for members during which a vast array of topics are covered ranging from relevant training and education to real-time reactions and analysis of world events.
During the COVID-19 pandemic, for example, the group dealt with how investors were coping with state-specific and national shutdowns and regulations, the legal perspectives affecting the lending industry, and how the pandemic was affecting the “natural life” of private loans.
“COVID and the associated regulatory actions were very disruptive to the industry,” Hornik recalled. “We were discussing what investors could and could not do, how PPP funds were being made available, what people were doing with tax credits, etc. Information was exchanged on those calls that helped companies survive.”
“Contributing in a Meaningful Way to Make Lending Better”
One of the things both Tennyson and Hornik emphasize about NPLA membership is that it is not an easy association to join. The difficulty is deliberate, because NPLA members have the common belief that every member has the ability and responsibility to directly improve the industry.
“You don’t just sign up for NPLA,” Hornik explained. “You have to be sponsored by an existing member, reviewed by a committee, then invited to join. That process exists because we all believe that members should be able to contribute in a meaningful way to the collective group and make us better.”
“Our organization harnesses the expertise and knowledge of the best and brightest in the lending space and those who have had a long history in the private lending and mortgage industries,” added Amy Kame, NPLA’s managing director. “For us, it is important that NPLA is at the forefront of continuing to set standards for our industry. That is a big piece of what we do in our Best Practices and Ethics Committees.”
The NPLA considers those two committees to be “essential” to the function of the association and constantly monitors, reviews, and updates both the NPLA Code of Ethics and its best practices. The Best Practices Committee focuses on the processes, ideas, and procedures associated with private lending in the real estate space.
“We want to make sure that we are interacting with our lenders in the most efficient ways and that they are learning from us,” Tennyson said. “We, as industry participants, are always looking for ways to create a more professional environment for professional private money lenders.”
Along with the Best Practices Committee, the Ethics Committee works nonstop to review, refine, and update the NPLA Code of Ethics, which is published and resigned annually by every member. “Without best practices, without ethics, and without legislative representation, we cannot grow properly as an industry,” Hornik said. “That is what NPLA is meant to do.”
A Voice for the Industry Loud Enough to Hear
When NPLA was founded in 2019, all the founders believed the industry was in dire need of effective representation at a legislative level. To fill that need, the organization was designed from the beginning to represent the interests of private lenders dealing in real estate-based transactions. Hornik, with a long-established reputation as an advocate for real estate lenders and private lenders, was the perfect fit for the NPLA Advisory Council.
The Advisory Council is intended to serve as an “unbiased sounding board” and is made up of the most senior leaders of the private lending industry. It also works closely with the Legislative Committee, which scouts for state and federal regulatory changes relevant to private lending and, when appropriate, deploys resources to address issues and educate legislative bodies on the practical fallout of certain proposed actions.
Hornik, who also serves as the four-term mayor of Marlboro, New Jersey, has particular empathy for lawmakers and policymakers attempting to enact laws that will benefit a community without inadvertently harming it. Understanding what information a policymaker will value and, hopefully, utilize is integral to the advocacy work NPLA does on behalf of the private lending sector.
For example, in one recent case, the NPLA took fast action against a New Jersey foreclosure law that would permit the debtor on a property in foreclosure to buy that property back at the foreclosure sale for 50 cents on the dollar.
The legislation had been passed by both the state assembly and the state senate. The legislation, appealing titled “The Community Wealth Preservation Act,” was popular among legislators because it appeared to help distressed homeowners. However, Hornik was quick to point out, it would have “ruined lending in New Jersey not just for private lenders, but for every lender” because any property owner could default on the original loan and then buy back the property for a 50% discount at the foreclosure sale.
Once the NPLA had broken down the true ramifications of the legislation, the New Jersey governor vetoed the law. “It was imperative we point that out,” Hornik said. “If we had not, it would be the law in New Jersey right now.”
He continued, “If you just call a lawmaker in office and tell them their sponsored legislationis bad or even that you have a petition demonstrating that a lot of people think this, that petition is not helpful.” In fact, Hornik pointed out that petitions typically are more effectively used to generate leads for businesses rather than achieve true legislative change.
“What lawmakers really want to know is, ‘What is the impact on the community as a whole and why?’ or ‘Is the legislation going to cause me to fall short of my stated goals?’ The NPLA goes through legislation and then makes sure that policymakers understand the ramifications of a piece of legislation on the private lending community because what affects this community affects the communities and housing options everywhere,” he said.
Hornik concluded, “What the private lending industry does is provide needed capital to improve housing when no other lenders will do it, and that is never, ever a bad thing.”
SIDEBAR 1
NPLA’s 3 Foundational Pillars
The NPLA focuses on three foundational pillars: industry advancement, building community through education and mentorship, and strengthening the industry’s legislative voice.
Pillar One // Industry Advancement
“Our organization harnesses the expertise and knowledge of the best and brightest in our space,” said Amy Kame, NPLA’s managing director. “The industry has changed so much with Wall Street’s participation in private lending, but we are still on the cusp of so much further innovation, advancement, and change.”
NPLA believes that part of advancing the industry and continuing to build legitimacy in the space involves regulation, clarity, and effective communication across the board between members of the industry, counterparts outside the industry, and individuals and groups attempting to enact legislation and regulation.
“I am very proud of the fact that capital markets are starting to recognize the professional standards NPLA has played a part in bringing into the industry,” said Jeff Tennyson, CEO of private lender Lima One Capital and chairman of the National Private Lenders Association (NPLA) Advisory Council. “That is why we are seeing continual growth, why we had the first securitization of single-family rental loans, and why others are being so supportive today as they look at other areas of our business like the fix-and-flip loans, new construction loans, and residential transition loans. The recognition of those products will allow the cost of lending for private money lenders to continue to go down and provide better cost of funds for our real estate investors to use in their investment projects.”
Pillar Two // Building Community Through Education and Mentorship
“Whatever issues are facing the housing market today, whatever issues our members are going through, they always know they have a network on which they can rely for advice, education, and networking throughout the entire year,” Kame said proudly. NPLA members gain access to bi-weekly conference calls, a LinkedIn members’ group, national conferences, industry advocacy, and ongoing education and mentorship.
“This pillar focuses on facilitating partnerships and expanding members’ knowledge and perspectives,” said Tennyson. “We understand the continued growth and success of private lending relies on members knowing and adhering to best practices and ethical lending standards. NPLA moves the industry forward.”
Pillar 3 // Strengthening the Industry’s Legislative Voice
“This pillar is so much more than just lobbying, advocacy, or providing comments on certain bills,” Kame explained. “This is about partnering with industry groups, leveraging our membership base to be the boots on the ground for private lending, and making sure our collective messaging about who we are and the important impact and role our members have in communities is communicated effectively with legislators and the public.”
Learn more about NPLA’s 3 Pillars at NPLAOnline.com.
SIDEBAR 2
Looking Forward, Giving Back
NPLA members believe in supporting the private lending industry, and the organization also believes in giving back to communities in need. To this end, in 2022, NPLA members raised $31,000 for Habitat for Humanity of Greater Miami to support the construction of affordable, local homes. In 2023, NPLA has announced a partnership with St. Jude Children’s Research Hospital. Perhaps the best example of a real-time response to current events and community needs is the NPLA affordable housing initiative launched during the COVID-19 pandemic.
Early in the pandemic it became evident how short many families were going to run on food and school supplies during pandemic lockdowns. In response, NPLA partnered with Mercy Housing to address the issue. Mercy Housing is a leading national affordable housing organization serving low-income families, seniors, people with disabilities, and individuals from all walks of life seeking housing options to fit their unique needs. The organization currently provides more than 500,000 services to more than 40,000 residents.
“After we partnered with Mercy Housing to help stock their food pantries and help with school supplies, we knew that charitable giving was something we wanted to focus on as we moved forward as an organization,” Kame recalled. “It is so important for us as an organization and for our members to come together for a common purpose and a good cause.”
Jon Hornik, partner and chair at Private Lender Law Group and also a founding member, executive director, and general counsel for NPLA, concluded, “We will continue this critical work as our members understand the collective impact they can make on communities and families across America.”
