State denies request for lenders’ data

The public has no legal right to know how state regulators rate the financial health of private lenders soliciting investor money, according to the Nevada attorney general’s office.

The Review-Journal on Wednesday received a copy of that ruling, which came in response to the newspaper’s request for public records kept by the Nevada Mortgage Lending Division.

The newspaper sought the grade that the division gave to private lenders, the contents of examinations that were used to grade the firm’s financial health and the dates of the last two exams of 28 private lenders doing business in Nevada.

The Attorney General’s office, on behalf of mortgage lending, denied the request.

Disclosing the grade “might sway consumers toward or away from” a private lender, the attorney general’s office said in its opinion.

Some might use the grades to say misleading things about a private lender, giving other private lenders “unfair competitive advantages,” according to the attorney general’s office.

Private lenders solicit money from individual investors and use the money to make short-term loans to developers. These loans, sometimes called trust deeds often yield double-digit interest rates, which typically are three times the yield of federally insured bank deposits.

The industry provides a key source of financing for real estate developers in Southern Nevada, but several private lenders have collapsed in recent years amid allegations of fraud and mismanagement.

USA Capital, for example, failed owing $966 million to 6,000 investors last year. Some investors are still waiting to recover some of the money they entrusted to USA Capital.

The Review-Journal on June 7 sent a request for the results of the last two division exams of private lenders, as well as the dates of those exams. The division rates private lenders from 1 to 5, with 1 being best, based on its examination of the private lenders’ financial records.

Mortgage Lending Commissioner Scott Bice referred the request to the Nevada attorney general’s office.

Deputy Attorney General Richard Dreitzer responded with a July 23 letter denying the request.

“The public would be adversely affected by such a disclosure in that this material, whether positive or negative, might sway consumers toward or away from a particular entity,” Dreitzer said.

“The contents of one (1) examination of one mortgage broker, is often far from the entire picture that a consumer should consider when evaluating that broker,” Dreitzer said.

Commissioner Bice said he would like to disclose the grades his office gives to private lenders but said he is prohibited from doing so by state law. Dreitzer agreed with that legal interpretation.

Assemblyman Joseph Hogan, D-Las Vegas, introduced a bill this year that would have made the grades on financial exams public information, Bice said. The commissioner said he supported the bill but the bill died in the Assembly Commerce and Labor Committee.

Bice was asked if he had conducted exams of private lenders as required within the 12 months allowed by state law. Bice said he believed he had but added: “There could be one that could fall outside of the 12 months.”

Bice has submitted his resignation effective July 31 so that he can establish a mortgage lending department for a Town & Country Bank.