Executive talks sector's growth ahead of upcoming NPLA Miami conference
Deregulation appears to be the name of the game for the new federal administration in Washington, with Donald Trump and Elon Musk taking an ax to a whole host of agencies and watchdogs during the past several weeks.
But strict regulatory oversight in the banking space is among the factors that has fueled the growth of private lending in recent years – and that alternative financing is well poised for further progress down the line, according to National Private Lenders Association (NPLA) owner and founding member Jonathan Hornik.
Speaking to Mortgage Professional America ahead of the association’s upcoming Miami conference, which he said was set to welcome more than 600 attendees from across the mortgage industry, Hornik pointed to the contrasting regulatory requirements between bank lenders and private institutions as a key reason many borrowers had gravitated toward the latter.
“President Trump is clearly on a deregulation movement but a lot of the regulations that have been put in place and enforced over the years have hurt traditional banks’ ability to make loans,” he said. “They’re worried about Basel III [the international regulatory framework for banks], they’re worried about their concentration mix. They’re worried about their stress tests and they will just not lend – which means there’s still entrepreneurship and there’s still loans that need to be made in this country.”
Private lending grows as housing crisis continues
Demand for housing has remained strong in the years since the global financial meltdown in 2007-08, despite a chronic lack of supply and those tighter lending restrictions facing the country’s largest institutional lenders.
That means borrowers who want or need to buy but aren’t able to secure a conventional loan are turning to other means to meet their financing needs. “Estimates [say] two to four million homes are lacking credit and private lenders play a huge part in filling that gap,” Hornik said. “When you can’t get new construction in an area, what you can do is have somebody invest in an older piece of real estate and then rehab it, and then sell it or rent it.
The potential end of the CFPB has sparked speculation, but widespread deregulation isn’t expected, says Angel Oak Mortgage Solutions president Tom Hutchens. He notes most lenders already operate under strict compliance and would continue doing so. https://t.co/Q6JBncddyi
— Mortgage Professional America Magazine (@MPAMagazineUS) February 19, 2025
“Private lenders can move more quickly with less regulation than traditional banks and traditional lending sources – and time is money. It’s as simple as that, and people will pay a little more for a faster close and certainty in order to make their deal. That’s going into all underwriting right now, and we see it nationally.”
What’s more: the cost spread between conventional and nonbank lenders has narrowed, Hornik said, another leading reason behind the growing popularity of the private space.
State regulations a persistent challenge to private lending growth
The space made $8 billion in securitizations last year, with $12 billion targeted for 2025, according to Hornik. “We’re looking for an up year, both DSCR and RTL, and the real thing we’re going to focus on is regulation in certain states and what states to [lend] in,” he said.
“Some states are passing laws to prohibit liquidity, prohibit transactional activity or stop foreclosures from happening because they think it’s benefiting the borrower- and there are other states that allow more free business to operate. Those are the economies that are going to thrive.”
State regulation remains the most important consideration for private lenders, with very few federal rules impacting that space – but those state laws can prove controversial, recently highlighted by Maryland’s Office of Financial Regulation requiring statutory trusts to be licensed as originators to buy closed loans. That interpretation of case law, Hornik said, is leading some prominent multistate originators to shut their doors in Maryland.
Held three times a year, NPLA’s next conference will take place from March 16-18 at Lowes Miami Beach Hotel and welcome banks and capital providers, lenders, investors and borrowers, brokers, developers, asset managers, owners and operators, legal service providers, title companies, rating agencies, real estate agents and more for an immersive event aimed at facilitating dealmaking and business growth.
“It brings every aspect of private lending together in a coordinated manner for allowing people to talk and do business together,” Hornik said. “It’s private lenders, borrowers, brokers, service providers, those who give analytics on the private lending space and everything in between.”
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