Am I Being Scammed? Origination Fee

Private Lending & Conventional Mortgage Advice

Am I Being Scammed? Origination Fee

Investor · King of Prussia, PA · Member since 2014 · 1k+ posts · 339 votes

I’m looking for a loan to purchase an 5 Unit apartment and came across a lender. He told me I have to pay a $3,600 origination fee for for $180K.

I told the lender from Metro Financial Services, INC that I didn’t want to pay the fee if it’s not guaranteed that I’ll get the loan to which he assured me that I will definitely be approved for the loan & there will be a contract letter stating I’m going to get the loan funds. If something happens my money will be refunded back to me.

What are your thoughts? Is this a scam? The lender’s name is Gerald Kelly. Thanks in advance!

0 Reply

40 views

Most Popular Reply

Jon Holdman

Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes

Originally posted by @Ayodeji Kuponiyi:

@Account Closed This is the terms & conditions:

TERMS AND CONDITIONS

1. The Loan attracts an interest rate of (4%) per Annum, and the loan repayment starts 2 months after loan has been transferred to Borrower.

7. Applicant is to pay a onetime fee which will cover the processing of all documents and transfer of funds to his/her account and this usually depends on the amount of you are looking for.

8. No loan can be approved for a borrower with credit scores below 400.

There are many red flags in these "terms". Here are just a few.

"The Loan attracts an interest rate of (4%)". That would be a great rate. Red flag #1. The phrase "attracts an interest rate" is language no legitimate lender would every use. Red flag #2. Implying they could fund a loan at a 400 credit score. Bull... hockey. That's so far into dead beat territory nobody would fund that loan. Red flag #3. Up front fee. Red flag #4. Not just a red flag, a big burning bon fire with fireworks coming out in every direction. This "lender" is a scammer. Period. Move on.

14 Reply

See this reply in the discussion

42 Replies

Jump to latestLatest

Sort by

David Weintraub
Lender · Berkeley, CA · Member since 2017 · 1k+ posts · 549 votes
8y
It's not something I think lenders should do, but one of the largest in NJ makes borrowers pay up front 'commitment' fees. Doesn't mean it's a scam. I don't know if this is a scam, per se, but it does seem like they're trying to profit from you right out the gate, and that's no good.
0 Reply
Houston Pitts
Investor · McKinney, TX · Member since 2017 · 28 posts · 5 votes
8y
Frank, I have been searching for legit lenders for three weeks now. I contact 2-3 each week in my area. I have found NONE that do not take high, up front fees. I have been on blogs and talked over the phone with several experienced rental property owners that use loans and they say that those lenders normally will role those fees into the loan. If this is true, the upfront fees are probably a scam. You can run credit reports and backgrounds for $25. I myself haven't found anyone that isn't trying to "get at you up front" yet. Keep looking though. I am sure the right one will surface. Good luck!
0 Reply
Tom S.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
8y
@Ayodeji Kuponiyi I'd recommend just reaching out to local banks in your town, and ask for the commercial lending department. A 5 unit with the need for rehab is a perfect fit. I've done many deals like that with local banks that provided purchase + rehab funding, no upfront fees, great rates (5%).
Tip: deposit the rents from the 5 unit at that bank, establish a relationship, and the next deals will be that much easier.
Good luck!
0 Reply
Ayodeji Kuponiyi
OP
Investor · King of Prussia, PA · Member since 2014 · 1k+ posts · 339 votes
8y
@Tom S. great tip! Thanks!
0 Reply
Scott L.
Investor · Flower Mound, TX · Member since 2017 · 182 posts · 198 votes
8y
Originally posted by @Houston Pitts:

Chris Mason, thank you again for your help. I will look into those on BP. I have been stuck in the search mode for a couple of months now trying to find legitimate lenders. Had one deal pass due to time running out on contract. I am not giving up though. Its all just formulas and you have to fill in the blanks, the rest will work itself out. Thanks again Chris!
Do a google search or other search in Dallas area and you will find a number of HML. I used one local one I heard advertised on talk radio and I got a $100K pre-approval letter after they ran a credit check and they sent term sheets and paperwork to be filled out upon identification of the property. The only charge that was payable in advance would be an appraisal fee, and that's pretty much required by ALL lenders, and only after agreement on the terms, etc. The terms are highway robbery, but that's why they are HML 2-6 points, 12-14% interest, 6 month balloon, 70% of ARV. These were for an acquisition loan, but they have other types too. I won't name them here on BP, but if you look around there are a number of big "reputable" HML in Dallas.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
@Houston Pitts i suspect the reason you can't find any lenders and others say they can't is they for some reason think that normal rates are the same as full doc conventionial rates.. they simply are not.
if your an investor and you can't borrow from your local commerical bank.. then your a sub prime investor borrower and your going to pay higher fee's.
legit nationwide lenders are :
Lendinghome
Lendingone
Lima one
in texas Visio
and many many more. anyone advertising like this on social media is generally a fruad. ESPecially facebook or linkdin.
and on BP its when you ask for money then the fraudsters hit you hard.
you can tell right away this is a fraud.
English is no bueno
rate far to low
big up front fee
no real website or licensure.
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
4 Reply
Yiftach Ilyov
Specialist · Tampa, FL · Member since 2017 · 122 posts · 33 votes
8y
If you're being asked to pay origination before the loan was approved that's 100% a scam
0 Reply
Richard Elvin
Investor · Cleveland, TN · Member since 2016 · 279 posts · 187 votes
8y
@Jay Hinrichs I sent you pm asking a question you just answered in your post. :)
Thanks for giving us a heads up on which are legit HML's!
0 Reply
Houston Pitts
Investor · McKinney, TX · Member since 2017 · 28 posts · 5 votes
8y
Jay, thank you for your comments.
I have not been looking at traditional lenders nor their programs. I know, and prepared to pay for, higher rates and points for what I want to do. I am flipping properties. I have rehabbed a couple for rent and I have one I owner finance. I did that over a long time with my own money. I need to leverage in order to grow.
What I am having trouble finding are legitimate private or hard money lenders. I have only been able to locate many that wanted huge up front processing, application, and filing fees BEFORE even considering a loan. None that would make sure all was handled at closing table at a title company.
I am sure they are out there and they probably do not advertise on those social media sites you mentioned either. Probably working with a closed group of investors. I have been trying to network with local REI (that has been the most unproductive swim with sharks I have ever been exposed to) and looking for others that HAVE used legit lenders that could make recommendations.
I am not discouraged. Frustrated a little but not swayed from my goals.
If it were easy everyone would be doing it, right?
Thank all of you for your wisdom.
0 Reply
Houston Pitts
Investor · McKinney, TX · Member since 2017 · 28 posts · 5 votes
8y
Scott,
I will continue to look. Those numbers are high but will get better as I complete more loans with lenders. I will continue to Google search for them as you have suggested. Wish me luck! Thank you again for your help.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
@Houston Pitts lendinghome did 5 loans for me in Texas.... 199.00 up front.. closed in 10 business days
1 point 8%.... 25% cash to loan.. very simple. Visio is in Texas they have taken out many of my clients.
all these guys hit me up to sell loans for them since I am NMLS licensed.. but I really don't have the time to hand hold borrowers through the process.. and don't want to add my fee on top like most brokers do.. it would take you all of 10 minutes to have loan apps in with these two lenders.. if they for some reason wont lend to you.. then your probably not a viable candidate for some reason and will need to beef up your situation.
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
0 Reply
Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
8y
Originally posted by @Houston Pitts:

Scott,
I will continue to look. Those numbers are high but will get better as I complete more loans with lenders. I will continue to Google search for them as you have suggested. Wish me luck! Thank you again for your help.
One of the best sources for information on legitimate hard money lenders is a local title company.
Gimer Law516 Reviews
Website View Page
1 Reply
Houston Pitts
Investor · McKinney, TX · Member since 2017 · 28 posts · 5 votes
8y
Jay,
That's a light on the horizon. I am glad you had good luck finding one. I will look at them this week. Thanks for the helping hand. 😀
0 Reply
Houston Pitts
Investor · McKinney, TX · Member since 2017 · 28 posts · 5 votes
8y
Tom, It is funny you mentioned that. I asked three last month and the ones I spoke with said they do not work with HMLs or private money. They were in an office complex and I just walked the block. I just haven't found the right ones. As you have suggested I will continue to search. Thank you for your help.
0 Reply
Account Closed
Orlando, FL · Member since 2017 · 11 posts · 1 vote
8y
I think it is, I got into that situation myself on face book and the lender has a website which later turns out to be fake. I was also asked to pay origination fee and that it would be returned back to me. Do not do any kind of business with such lender.
0 Reply
Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
8y
Originally posted by @Houston Pitts:

Tom, It is funny you mentioned that. I asked three last month and the ones I spoke with said they do not work with HMLs or private money. They were in an office complex and I just walked the block. I just haven't found the right ones. As you have suggested I will continue to search. Thank you for your help.
Some title companies are captive. They are owned by (or affiliated with) the real estate brokerage they have an office next door to, or even a desk in. They have no interest in generating new business with investors... easy deals already come to them.
Investor deals tend to be trickier. More work involved... more issues to resolve... interesting situations to navigate.
Sounds like you found title companies that prefer the low hanging fruit. Keep looking.
Gimer Law516 Reviews
Website View Page
0 Reply
Mike ReynoldsPro Member
construction · Nacogdoches, TX · Member since 2011 · 2k+ posts · 1k+ votes
8y
Originally posted by @Ayodeji Kuponiyi:

I’m looking for a loan to purchase an 5 Unit apartment and came across a lender. He told me I have to pay a $3,600 origination fee for for $180K.
I told the lender from Metro Financial Services, INC that I didn’t want to pay the fee if it’s not guaranteed that I’ll get the loan to which he assured me that I will definitely be approved for the loan & there will be a contract letter stating I’m going to get the loan funds. If something happens my money will be refunded back to me.
What are your thoughts? Is this a scam? The lender’s name is Gerald Kelly. Thanks in advance!
Just came across this and found this link:
https://archives.fbi.gov/archives/phoenix/press-re...
Not sure if this is the same Kelly but it is worth noting for others on BP.
PHOENIX—On January 10, 2012, a federal grand jury in Phoenix returned a 25 count indictment against Gerald Lee Kelly, 47, of Gilbert, on four counts of wire fraud, six counts of mail fraud, 10 counts of money laundering, and five counts of structuring financial transactions to avoid federal bank reporting requirements.
Doesnt look good for someone of the same name as you posted. May not be the same guy though.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.