UPDATE – NY LENDER’S ALERT – COMMERCIAL FINANCING DISCLOSURE BILL

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UPDATE 12/24/20
AFTER A FLURRY OF ACTIVITY OVER THE LAST FEW DAYS AND BASED ON PRIVATE LENDER LAW’S OPPOSITION PAPER (SEE ATTACHED) SUBMITTED TO GOVERNOR CUOMO’S OFFICE ON BEHALF OF THE NPLA, THE EXEMPTION FOR COMMERCIAL LOANS SECURED BY REAL PROPERTY WILL REMAIN IN THE FINAL BILL – THE NY TILA LAW WILL NOT IMPACT PRIVATE LENDERS DOING BUSINESS IN NEW YORK WHICH MAKE BRIDGE LOANS AND TERM LOANS SECURED BY 1-TO-4 AND MULTI-FAMILY HOUSING.

NY LENDER’S ALERT – COMMERCIAL FINANCING DISCLOSURE BILL SENT TO GOVERNOR CUOMO’S DESK

THIS BILL WILL AFFECT PRIVATE LENDERS DOING BUSINESS IN NEW YORK WHICH MAKE BRIDGE LOANS AND TERM LOANS SECURED BY 1-TO-4 AND MULTI-FAMILY HOUSING.

On December 11, 2020, the New York legislature delivered a bill for Governor Cuomo’s signature that requires specific disclosures to be provided to certain commercial financing transactions. The New York Bill is similar to the recently passed California bill requiring similar disclosures. Lenders would have to disclose, for example: (i) the total amount of financing and disbursement amounts; (ii) finance charge; (iii) annual percentage rate calculated using the federal Truth in Lending Act methodology; (iv) total repayment amount; (v) term of the financing; frequency and average monthly payment amount for fixed payment amounts; (vi) payment schedule or description of method used to calculate amounts and frequency of payment, and (vii) average monthly payment amount, for variable payment amounts; (viii) all potential fees and charges that can be avoided by borrower; and (ix) a description of the collateral requirements. If borrower were to elect to pay off or refinance the commercial financing prior to full repayment, lender must disclose (i) whether the borrower would be required to pay any finance charges other than interest accrued since their last payment; if so, lender would also have to disclose the percentage of any unpaid portion of the finance charge and maximum dollar amount the borrower could be required to pay and (ii) whether the recipient would be required to pay any additional fees not already included in the finance charge.

The New York Bill requires that providers of commercial financing provide disclosures to borrowers at the time of extending a specific offer of commercial financing. The New York bill does have certain exemptions, including exemptions for “financial institutions” (Federal or State chartered banks, savings and loan associates, saving banks, and credit unions authorized to do business in New York) and for any person or provider who makes no more than five (5) commercial financing transactions in New York in a twelve (12) month period.

Governor Cuomo has thirty (30) days from the delivery of the bill to sign or veto the bill. If the Governor signs the bill into law, the bill requires that the Superintendent of the Department of Financial Services prescribes formatting requirements for the disclosures. Private Lender Law will continue to monitor this bill to provide guidance to the industry as move forward. If you have any questions please contact us at (212) 536-3529.

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