ATLANTA — Debate in the final days and hours of the Georgia legislative session over a contentious proposal to safeguard developers’ personal assets sank one non-controversial bill and nearly swamped two others.
A week after the midnight finale to the 2012 session, legislators and financial experts reflected on what happened and what nearly happened in those heated moments.
The controversy swirled around Senate Bill 448, nicknamed by opponents the developer bailout bill and sponsored by Sen. Don Balfour, R-Snellville. It would have limited the amount an investor could collect from someone who signed a personal guarantee for a loan. Often, investors buy the right to collect loans at a large discount, sometimes a fraction of what was lent. But they are able to collect, or try to collect, 100 percent of the outstanding loan amount. If a borrower who gave a personal guarantee doesn’t pay up, the investor can collect the personal assets, including cars, boats, vacation homes and savings accounts.
Some large developers at risk of losing their personal fortunes lobbied legislators to pass SB 448 to protect them.
Bankers, though, warned that the bill would also cripple the state’s economy because it would limit the number of loans made in the state since investors who couldn’t expect a profit on loans aren’t likely to buy them. If banks can’t sell their loans, they won’t have enough money to make more, so the reasoning goes.
The impact wouldn’t be limited to real-estate developments, but also to credit cards and car loans, even home mortgages for some first-time buyers.
“It would have clearly caused more blanks to fail,” said Joe Brannen, the president of the Georgia Bankers Association.
Supporters expressed outrage at out-of-state investors that have bought up lots of those loans and stand to reap huge profits by collecting far more than they spent to buy the them.
The Senate easily passed SB 448, but the House kept stalling it as opposition grew. By the final hours of the session, supporters were looking for other bills to attach all of part of its provisions to.
One bill they used as a vehicle for their amendments was House Bill 129 by Rep. Doug McKillip, R-Athens.
“We certainly didn’t have any huge opposition to McKillip’s bill,” said Steve Bridges, a lobbyist for the Community Bankers Association.
McKillip introduced his bill last year, and it nearly passed until it became a vehicle for other bills and died in the final moments of the 2011 session. Even after stripping out last year’s amendments, history repeated itself, and the bill died for good last week.
The original bill would have prohibited a practice used in other states in which a developer collects a fee every time property it once owned is resold that, even years after the development has been completed.
“The concept of the bill, I don’t know anybody that had a problem with that,” said Bridges, a one-time Georgia banking commissioner.
The developer-bailout debate threatened to overlap onto two bills sponsored by Sen. Jesse Stone, R-Waynesboro. Both ultimately passed, one which would raise the amount of a home that’s exempt from foreclosure to match the federal level, and the other that would require a notice sent to property owners before a foreclosure.
Most Georgia banks already send a notice, but current state law only requires notices of personal dwellings, not farms, businesses or rental property.
Stone’s law firm is one of the state’s largest handling farm bankruptcies, and he represents many other commercial borrowers after starting his career representing lenders. He drafted the bill after several of his clients lost their property before they even knew it was being foreclosed on.
Stone, a freshman, aimed to avoid controversy and hoped his bills wouldn’t attract amendments that would weigh them down.
“I don’t try to do the extremes. I try to do what is reasonable, what people think is already the law but it’s not,” he said.
And veterans of the Capitol gave him high marks.
“He was pretty active this session and did a good job,” Brannen said. “He’s been good to work with. He’s awfully smart.”
Stone’s were the measures that passed, not those of McKillip, a veteran of the House, nor Balfour, one of the most powerful members of the Senate.