BILL ANALYSIS Ó
SB 647
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Date of Hearing: July 15, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 647
(Morrell) - As Amended June 25, 2015
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|Policy |Banking and Finance |Vote:|12 - 0 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill adds land that produces income from crops, timber, and
minerals to a category of property for which threshold brokers
are authorized to solicit investors, so long as the
loan-to-value (LTV) for the property does not exceed 60%. The
bill also makes clarifying changes to the investor
questionnaires threshold brokers must obtain prior to completing
any sale of securities or deeds of trust, and deletes a
requirement that persons who rely on a certain securities law
exemption when brokering real estate submit information about
their offering to the Department of Business Oversight (DBO).
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FISCAL EFFECT:
Negligible fiscal impact to DBO as a result of eliminating
reporting requirement, possible minor increase in enforcement
costs to DBO to monitor exempt transactions.
COMMENTS:
1)Purpose. According to the author, existing law governing the
types of property for which threshold brokers are authorized
to solicit investors has not been updated in decades.
Currently, it is unclear whether land producing income from
crops, timber, or minerals is "commercial income-producing
land" subject to a maximum LTV of 65% or "other real property"
subject to a maximum LTV of 35%. This bill creates a new
category to cover those properties and assigns a maximum LTV
of 60%.
The bill also deletes a requirement that persons relying on a
securities exemption for real estate licensees who sell whole,
unfractionalized notes, to a single investor backing a loan,
submit information about the offering to DBO. Those
transactions are already regulated under Article 5 of the Real
Estate Law.
2)Threshold Broking. According to the Bureau of Real Estate,
there were 317 threshold brokers operating in 2013, and they
arranged approximately $12.4 billion in loans. Threshold
brokers can arrange investor financing for real property or
act as a lender, and often work with smaller, less
sophisticated investors. As a result, threshold brokers are
subject to special reporting and disclosure requirements not
imposed on other real estate licensees. The clarifications to
the investor questionnaire requirements in this bill ensure
SB 647
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brokers receive completed questionnaires at least two days
prior to completing any sale, and receive updated
questionnaires from their investors on an annual basis.
Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081