Florida Adds MBLA Provisions Regarding Business Purpose Loans and Licensing Exemptions

Florida recently enacted amendments to the Florida Mortgage Brokerage and Lending Act (MBLA) making it unlawful for any person to misrepresent a residential mortgage loan as a business purpose loan, and defining “business loan.”  The amendments also create an exemption from the MBLA’s regulations for persons in the securities business engaging in certain activities implicating the MBLA.  The amendments take effect July 1, 2019 and July 1, 2018, respectively.

According to the Florida Legislature’s Banking and Insurance Committee, the legislature added the business purpose loan provisions to the MBLA in response to alleged unlicensed mortgage lending activity.  According to the Committee, certain lenders in South Florida were providing residential mortgage loans with usurious interest rates and high fees “under the guise of business purpose loans” to avoid the MBLA’s licensure and disclosure requirements, and refused to make “residential loans” unless the borrower formed a limited liability company.  In response, the Florida legislature amended the MBLA to prohibit any person from misrepresenting a residential mortgage loan as a business purpose loan.  The amendments also provide that a “business purpose loan” means “a mortgage loan, the proceeds of which the borrower intends to use primarily for a business purpose and not primarily for a personal, family, or household purpose” and that in determining if a loan is for a business purpose, “a person must refer to the official interpretation by the [CFPB] of 12 C.F.R. s. 1026.3(a).”

The amendments additionally create an exemption for securities dealers, investment advisors, and associate persons registered under the Florida Securities and Investor Protection Act if the person, in the normal course of conducting securities business: (i) solicits or offers to solicit a mortgage loan from a securities client, or refers a securities client to an entity exempt from regulation under the MBLA’s general provisions or mortgage broker provisions, or to a licensed mortgage lender, broker, or loan originator; and (ii) does not accept or offer to accept mortgage loan applications, negotiate or offer to negotiate the terms or conditions of a mortgage loan on behalf of a borrower or lender, or negotiate or offer to negotiate the sale of an existing mortgage loan to a noninstitutional investor for compensation or gain.

Copies of the amendments can be viewed here and here, respectively.