So a broker calls me and says, "I've got a hard money loan that is right up your alley."

Great. Tell me about this loan.

"You do land deals right? This one is a sweet 50% LTV deal on a water front lot in Florida. We have a good borrower with a 720 mid score who has owned this waterfront lot in Florida since the '80's. Property should be worth about a million bucks right now, and after he develops it the property will be worth about $3-4 million.

Can you get him a 11.95% rate for this slam dunk deal?"

Yes, happy to. Just like you mentioned, this does sound like it's right up my alley.
Fax me a 1003 and credit on the borrower. I will then fax over a Letter of Intent. Once the borrower signs the letter of intent, I will call a couple local appraisers so we can verify the current value of this waterfront lot.

"Oh, this guy doesn't want his credit pulled. And he told me that he doesn't need to fill out any forms, because this is a hard money loan, and the property is very valuable.

He also is not sure that an appraisal is necessary because right now the lot is actually under water. His plan all along is to take the loan money and build a boat moorage facility on the lot.

He does want to know if you can fund it by the end of November? Can you please expedite because I get the feeling he will take this loan to another broker if I can't find a lender quick."

The preceding is true. The Truth is actually stranger than fiction. This type of stuff is hard to make up. I have not changed the names to protect the innocent or guilty.

Florida swamp land? No. This was Florida completely under water land.

Hard money brokers: Love 'em or shoot 'em?

60% of the loans I look at are submitted to me via loan brokers. Now understand, I do NOT make any residential home loans.

Of the brokers that call me, almost all of them are brokers who primarily only handle residential home loans. These residential loans are made to the home owner/borrower and immediately sold to a big quasi government agency like Fannie Mae or Freddy Mac.

In other words, the broker is only getting a commission on the transaction, and once the loan is closed and sold off to Fannie Mae, the broker could care less about the loan, the borrower, the lender etc.

Believe it or not, most loan brokers don't give a rip about anything associated with the loan, other than closing it and getting paid a commission (I know that sounds strange).

The problem for me is that I am loaning out my money. It doesn't get sold to anyone. I live with the loan (good or bad).

Now if the broker only gets paid if a loan closes, and gets squat if the loan doesn't close, do you think it is out of the question that some of these brokers could be "fudging" some of the information on the loan applicants or property?

U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) reported that mortgage loan fraud in the United States rose 35 percent in the past year.

Smokey Bear says, "Only you can prevent forest fires."

President Reagan says, "Just say no to drugs."

I say, "don't go to jail, tell the truth on your loan."

I just got off the phone with you, and you mentioned that the interest rate would be 13.95%

"That is an outrageous interest rate! Who do you think you are?"

I am just a private hard money lender.

My money is not appropriate for every borrower.

Let me share something with you. This blurb is posted on the main web site: http://www.hardmoneyonly.com

I will only consider your loan request if you have been turned down by another bank or lender.

If you have not been turned down, please stop now, do not continue and I would encourage you to call your local bank first.

You should first try getting a long term, low rate loan with your local bank. The reason for this is that I only make short term, high interest rate loans.

If you can get cheap, long term bank financing, then you should.

If you (or the property) cannot qualify for a bank loan, or if you don't want to jump through all the bank hoops, hurdles and red tape, then please call me.

Outrageous interest rate? Maybe.

25 years ago, we drank water from the garden hose. Now people are paying $2 for a bottle of drinking water? Now that's outrageous.

Hard money loans - Value, Value, Value. What is the property worth?

Consider this scenario:

"Mr. Hard money lender, my property is worth $1,200,000. I have owned this vacant commercial property for 4 years and only owe $315,000 against it. My fico score is 618 and I am self employed. Can you make me a 50% loan with no bank statements, no tax returns, no nothing, other than an application, title insurance and an appraisal?"


My response, "Of course I can. All of my loans come down to clean title and acceptable appraisal to verify the value. So, in this case I am happy to make a $600,000 loan against this property. Let's get going with it."

Now let's fast forward 8 days...

"Hey Mr. Hard money lender guy, this is the appraiser calling you about that vacant commercial property. When I went out to do my appraisal of it, I noticed that there was a FOR SALE sign posted on the property, from a local real estate agency here in town.

When I called the local listing agent he mentioned that the asking price for the property is $850,000. He mentioned that it has been on the market for just under 4 months.

Oh, and by the way, the borrower keeps calling me. He wants to know when my appraisal will be completed and he keeps pestering me about the fact that the property is 'easily' worth $1.2 million. Since you are the lender and the client on this appraisal, I just wanted to give you a heads up about this."

Deal or No Deal?

Why did the borrower represent that this property is worth $1,200,000?????

The propety is sitting on the market and NOT selling at $850,000. Is this borrower on crack? Is the borrower trying to scam the lender? I gotta tell you, I see this happen all the time...

NO DEAL.

Mr. Borrower, your "pants are on fire."

"OK Mr. funny guy, are you saying that you will make a hard money loan on any real estate if it makes sense?

Fair question to ask me.

Answer: No I won't.

Consider this scenario:
Property with only $250,000 in liens against it.
Borrower thinks it will appraise for $1.2 million.

"But I want to refi my old gas station property. I will be turning it into a pizza parlor (once my ex-wife moves out). Just because the IRS has liens against me is no reason to deny this loan. And I really don't think the old Environmental Protection Agency will enforce their cease and desist order..."

Thank you for playing. PASS.

Even though a ton of equity in the property, I would pass on this lending opportunity.

Have a great day!