What are your pet peeves/frustrations with hard money lenders?

Question

What are things you would change about the hard money lending process? We really do our best to protect our borrowers and try to put them in a position to succeed. I often get pushback about appraisals and inspections. What do you dislike about using hard money and it's processes?

Mike Klarman · Answer

The most annoying things is being told two different things by two different departments. The way these lenders work usually is that there is a Loan Officer out front who on boards you and they are your "rep" for the loan, then that loan officer has a processor who will gather what is needed from you to complete the loan file for the Underwriting team which is a totally separate department and then they do their thing and then when it comes out the loan is voted on by the committee who has final say for approval. Sometimes the loan officer tells you one thing, UW team says the opposite or the Processor asks for a certain doc and then UW team asks for something different or sometimes UW approves but then committee has a few extra conditions before approval. It's not a seamless process, it's choppy. That's why it's sometimes worth it to have a good broker who can get in front of everything.

Elealeh Fulmaran · Answer

Two fixes would win a lot of borrowers: make appraisals and draws faster and more transparent. Let us submit our own comp pack up front and give a clear appeal path when value misses, with target turn times. For inspections, simplify to milestone-based photo/video plus one surprise spot check, and disclose exact draw timelines and fees before closing. Also align leverage to risk instead of one-size caps, and reward clean execution with lighter docs and quicker draws on the next deal. Speed, clarity, and predictability beat a quarter point every time.

Erik Estrada · Answer

As a broker, my biggest pet peeves are hard money lenders circumventing to my clients, not being upfront about fees, asking for a commitment fee prior to issuing loan docs, and "matching" my broker fees, even though I underwrote the file, got the client, and did all of the processing work.

Erik Estrada · Answer

Not all of them. Especially if they are high performers..

Speaking for myself, I work my butt off to make deals happen. Even IF the odds are against me.. Sometimes we get crappy clients that tell us lies or try to hide stuff and blame everything on you. Sometimes we get lenders that can't get a definite answer and are trying to switch terms on you because they couldn't deliver.. As an LO/Broker, I learned how to pivot, make things work, even if I am getting yelled at by realtors/clients. Why? Because I know I can close, no matter the circumstances.

The lazy ones can't survive a market like this. They will work at a normal 9-5 and be content living a simple life. A top performer LO, holds themselves accountable and to a higher standard. Maybe it might be the ones you are working with that are "lazy". But I can guarantee they won't last 6 months. Their pipeline will be dry and no one will call them back to do business.. Even if they sell on price.

Roberto Reyna · Answer

Those are interesting frustrations to hear. Our company, and most competitors in Houston, fund draws usually 3 days of the week and funds are received same day or at the latest next day. I require my borrowers to send me their comps, no matter the experience level. With appraisals, if numbers are analyzed correctly by borrower and lender then the appraisal value should be in line. Our inspectors do utilize photo and video during their draw inspections, and our draw timelines & fees are clearly stated from the day of application. Good borrowers will always rewarded with better rates, and if they understand the lender process then the next deal will be even quicker/lighter. The best is speed, clarity, predictability for borrowers AND the lender keeping that quarter point.

Mike Klarman · Answer

LO's are lazy.

Roberto Reyna · Answer

This definitely makes sense. Although there are different departments for all lenders, a good LO should underwrite the deal initially in order to avoid any of the issues you are mentioning. If they do their job correctly, there should be no need for the UW team or for committee approval. Unless it's a complex project that may not confirm to the lender's risk guidelines, committee really shouldn't be necessary. We have a borrower portal that allows borrower's to upload all documents needed, and my borrowers really prefer that they upload documents instead of sending them to me or our processors. Sorry to hear about your choppy experiences, wish we could have helped!

Roberto Reyna · Answer

That would definitely get annoying. We do 2 and 1 for our brokers, and definitely don't charge any kind of commitment fees. We also put all of their company branding and logo on documents, so brokers can feel reassured that clients will not go around them. We'd be happy to work with you and show you the difference. Thanks for your input, Erik!

What are your pet peeves/frustrations with hard money lenders?

What are your pet peeves/frustrations with hard money lenders?

Most Popular Reply

9 Replies