Effective
January 1, 1998, certain multi-lender transactions are
exempt from securities qualifications through the Department
of Corporations (DOC) if arranged by a real estate broker
who complies with all the provisions of Business and Professions
Code Section 10229, including specified notice, advertising,
trust account, reporting (to DRE), disclosure and other
related requirements, and the interest of each lender/purchaser
is recorded. These transactions, which may not include
more than ten lenders with qualified net worth or investment
income as defined, are commonly known as "fractionalized"
loans. "Self-dealing" is not permitted in
multi-lender transactions except in very limited circumstances
and must be fully disclosed in the Lender/Purchaser Disclosure
Statement (see Business and Professions Code Section 10229(d)(1)(A)
& (B)). Further, a multi-lender transaction must include
a servicing agreement. Otherwise, the broker shall disclose
the same information as listed above for single-lender/purchaser
transactions, and the following additional disclosures:
• notice of the right to obtain a copy of the
appraisal;
• a broker determination statement
if the broker determines to exceed the maximum statutory
ratios of the value of the loan to the market value of
the property (in no event to exceed 80 percent of the
current fair market value of improved real property plus
an insurance factor);
• default and foreclosure
procedures for governing the actions of all holders of
interests in the loan by the vote of holders of more than
50 percent of the beneficial interests;
• the
identity of the escrow holder for the transaction; and
• the right, upon demand, to obtain the names and
addresses of the other lenders or note holders on the
loan.
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