New Senate Bill 7231 Raises Private Lending Industry Concerns

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On behalf of the NPLA, Private Lender Law (PLL) has reviewed a new bill in the NY Senate introduced by State Senator Julia Salazar and Assembly member Harvey Epstein that would include mezzanine debt in mortgage recording and include such transactions in the mortgage recording tax. The bill defines mezzanine debt as debt carried by the borrower that may be subordinate to the primary lien, or common shares and reported assets that are used to finance a primary lien.

Essentially, that means that the current mortgage recording tax — which is 0.5 percent for mortgages of any amount (and 0.8% in the 12 counties serviced by the Metropolitan Transportation Authority) — would include even debt that is currently not publicly recorded. The proposed legislation would upend New York’s real estate finance practices and, according to its sponsors, produce as much as $4 billion in annual revenue statewide. The revenue from the proposed tax would directly fund public housing.

This bill, which is currently in the Judiciary Committee, would raise the cost of capital Borrower’s currently use to fund projects. Mezz debt, or Equity Pledges, are commonly used to provide Lender’s with additional collateral and provide Borrower’s with a source of non-mortgage funding to be used to help finance projects. Many times fund raised from Mezz loans are used to satisfy required equity contributions from Borrowers.

PLL is working with the NPLA and the NPLA lobbyists to develop a game plan to make sure the private lending industries concerns are addressed with this new bill. Should you have any questions or concerns, please contact Jon Hornik, (212) Lendlaw (212) 536-3529 or

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