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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          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  








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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