Tim, I finally have a hard money loan that will work for you...

Motivated Broker: Jim, I have a perfect loan for you. I know that the last few
didn't meet your approval, but this loan request is perfect.

Hard Money Tom: Great. Tell me about your hard money loan.

Motivated Broker: I know that you only do commercial and land loans. This
property is 3 lots with a duplex on one, a 4 unit on the other and a regular
house on the third lot. These are NON - owner occupied. Jimbo, this is slam dunk at 65% LTV. How quickly can you close?

Hard Money Tom: Sounds like you have a residential loan...

Motivated Broker: No. In Minnesota, we call non-owner occupied houses a commercial loan. It's a semantic thing. This would be commercial.

Hard Money Tom: Interesting... So, you can call it whatever you want?

Motivated Broker: Yea, it might look like a residential deal, but we call it a commercial loan here in Minnesota. Timmy, can you increase my broker fee to 6%?

Hard Money Tom: I am short, fat, bald and rude. If I lived in Minnesota could I describe myself as a George Clooney look-alike?

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."