being the lender on a mortgage

[Richard Glen]

In Cook County Illinois.

Can I do this?

I am considering giving a loan to a guy that bought a two flat for cash and is stalled 1/2 way with his rehab for lack of cash.  It will be a owner-occupied two-flat but he can't do a 203k because it is not habitable.  Portfolio lenders have similar issues in providing him with a construction loan.

Ideally the loan would be a properly recorded mortgage with a lien such that it would be paid off when he completes his project as part of the refinance.  I don't want the refinancing lender to have any concerns that it clouds title after closing.

In Illinois, there is an additional requirement to record either a Certificate of Non-Predatory Lending (if you are a bank etc) or a Certificate of Exemption for Non-Predatory lending.

One attorney has told me that I cannot record a mortgage without having a mortgage broker license. However how do hard money lenders do this then?

Perhaps I just need to find the right attorney or mortgage broker to help with this?

Here are a few links:

https://www.ilapld.com/Overview.aspx

https://www.idfpr.com/FinLit101/SB1167/PrivateMort...

https://www.idfpr.com/finlit101/SB1167/SB1167FactS...

[Jeff S.]

To completely and unfairly overgeneralize, @Richard Glen, rescue loans are almost always dangerous and never a good idea. Certainly, there are more qualified borrowers you could find to loan to?

In this case, you are making a consumer purpose residential loan and will need a broker licensed to do these. In addition to anything the state of Illinois needs, your broker will have to be an MLO with an NMLS license (look those up) and there will be many other restrictions.

Dodd-Frank, TILA, RESPA, the SAFE Act, and many other laws will apply. Your borrower will have many hoops to jump through; including showing he has the capacity to repay you. If he is in trouble now, how will he do that? What assurance do you have that he can repay you at all and how did he get into trouble in the first place? Most importantly, do you understand the limitations foreclosing on a homeowner in your state?

I wouldn't touch this even if it were a standard business purpose flip. As a consumer purpose residential loan, I'm guessing with no lending experience on your part, I suggest you stay far clear of this one too. There's a reason why even most experienced hard money lenders don't make consumer purpose loans – especially loans as this.

One option for your potential borrower might be to give up living there and turn this into a simple flip. Perhaps even transferring it into an LLC. Maybe sell it as-is to a flipper. Or, get an equity partner. Just some thoughts.

To answer your other question, it's state specific, but in those states that require a broker for a particular type of loan, hard money lenders will generally hire a broker of record to do their origination. We do. You might read this thread: Private Lending Rules.

Be careful, Richard. You can do better.