Nevada's hard-money lenders, who use investor money to make development loans secured by real estate, now face a dilemma.
The vast majority of hard-money loans have been foreclosed on in the wake of the collapse of the real estate bubble.
But at the same time, the hard-money lenders don't want to abandon investors who now hold interests in foreclosed properties, said Corrine Cordon, president of Capella Commercial Mortgage and president of the Private Lenders Group.
Many hard-money lenders would now like to manage those properties. The problem is: Most hard-money lenders don't have a real estate license required for managing properties.
Mortgage Lending Division Commissioner Joseph Waltuch discussed the issue Friday with 30 hard-money lenders at the Bradley Building, 2501 E. Sahara Ave. Another dozen participated by teleconference from Carson City.
The commissioner regulates mortgage brokers, including those who solicit investor money to make hard-money loans backed by real estate. The loans typically had double-digit interest rates that attracted many investors looking for higher interest than they could earn on bank accounts and certificates of deposit.
Real estate values collapsed over the last couple of years in the wake of massive residential mortgage defaults. More than $1 billion in hard-money loans are now delinquent or foreclosed. Few borrowers are current on hard-money loans.
Some investors in hard-money loans have traded their stakes in foreclosed real estate for interests in business trusts established by hard-money loan brokers. Others object to the business trusts and complain they have no way of finding other investors who share ownership with them in foreclosed properties.
While the names of investors are public record, Waltuch said giving out contact information could be a violation of privacy laws. He suggested giving investors in hard-money loans an opportunity to waive their privacy rights so that other investors could contact them.
Waltuch said he also could adopt a regulation, directing lenders who manage foreclosed real estate to obtain property management licenses from the Real Estate Division.
However, Waltuch fears that it will take longer than a year to get new regulations adopted, approved by the Legislative Counsel Bureau and certified by the secretary of state. In a year, the state Legislature will be convening for its next regular session.
David Goldwater, president of Goldwater Capital and an influential former Democratic assemblyman, said many hard-money lending rules should be handled through legislation rather than regulations.
"We could be here for months debating these issues," Goldwater said.
Cordon urged the division to start writing new regulations.
Waltuch said the division could write proposed regulations that could serve as guidelines for hard-money lenders while waiting for approval of the rules or new legislation.
"The Legislature has directed us to act (on regulations), and we will act, and we can do most of this, if not all of it, by regulation," Waltuch said.
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