What do hard moeny lenders do with deals they can't fund?

Question

What do hard money lenders do with deals they can't fund themselves? Do they ever broker the deal with another lender?

Robin Simon · Answer

It can be an option for hard money lenders - typically hard money is more regional and focused on specific niches than say non-QM platforms, so the option is definitely there to refer business to lenders that can take care of a deal you may not be able to fund

Erik Estrada · Answer

That's an odd question. Hard Money is usually the last resort after you have went through all your options.

If a hard money lender can't do it, who else would?

Doug Smith · Answer

Most of what we do is in-house or we broker to larger funds/lenders, but sometimes we'll work with smaller investors that are looking for smaller deals... sometimes in their IRAs. The issue with a lot of smaller lenders is that they lack the experience and resources to source and underwrite deals. We pull credit, underwrite, and doc the deal like a commercial bank would, so the quality of the loan is a better than what inexperienced small private lenders produce themselves. Most private lenders like us have funds that back them, so it's that we can't fund deals...we simply are saying no for a legit underwriting reason.

Erik Estrada · Answer

They wouldn’t be able to unless they are a broker and work with multiple Hard money lenders.

If you are going to a true Hard money lender, they are most likely a pool of investors that do their own underwriting. Sometimes they don’t require an appraisal.

Sarah Hatton · Answer

Hey Jake,

There are a handful of ways a HMLs can be structured. Most commonly will be "direct" lenders who use their own funds and hold loans in house. "Indirect" lenders partner with other lenders and institutions to fund their loans. Then there are lenders who do a combination of both; maybe a loan comes in that doesn't quite 'fit' the in-house guidelines (i.e FICO is too low, experience requirements, asset class, etc) but they know of another lender in the industry that would fund it and subsequently pass the loan off to them. Hope this helps!

Adam Smith · Answer

@Erik Estrada

Not all hard money lenders have the same credit guidelines. I think the question may be how do hard money lenders serve their clients if they can't fund a deal themselves. Do they make an effort to broker a deal with another hard money lender?

Chris Seveney · Answer

@Jake Daily

If they do broker it they still have the funds

I did hear of someone on BP offering hard money on renovation and actually didn’t have the funds and would originate the note and try and sell it to get money for it but he couldn’t sell the note so some borrowers got stiffed as they went to do a draw and the lender didn’t have money and just ignored them

Katherine Blazer · Answer

It depends on which lender you are working with. Some lenders work with multiple funds and banks, so if it does not meet one group's guidelines, they move on to the next.

But as Erik said, they are usually the last place people come to.

What do hard moeny lenders do with deals they can't fund?

What do hard moeny lenders do with deals they can't fund?

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