All Forum Posts by: Corey Dutton

Private money, non-bank lenders may have a tremendous opportunity to fund FHA loans in limbo this year. And you may be asking, what will happen to all of the FHA loans with the government shutdown? This looming question eats away at borrowers who are still waiting for FHA to give them a closing date. These anxious borrowers may be waiting a long time, days, weeks, maybe even months for refinances. Loans still waiting for a firm commitment from the FHA are likely to keep on waiting for awhile, sources say.

This is good news for private money, non-bank lenders, also called bridge lenders, or commercial "hard money lenders." Particularly for new purchases that have already been waiting months for FHA approval, the frustration of borrowers is at a boiling point. Many of them have already sought out alternative sources of financing.

But for properties located in rural areas, FHA may be the only option as some markets are avoided even by private money lenders. For those borrowers who are seeking FHA refinances, sources say these deals are going to the back of the line and could wait months for a commitment from FHA. Depending on the timeline for a refinance, a private money lender may be the only option for those in wait for FHA financing this year. Here's the source of the article:http://nreionline.com/multifamily/fha-deals-delayed-shutdown#comment-2751

Over the last few years, the number of mortgage brokers in the United States has shrunk drastically as new regulations have made it more difficult to do business. According to the National Association of Mortgage Brokers President Don Frommeyer, the Association had about 27,000 members in 2006. Today it’s down to about 5,100!

Frommeyer said that a lot of brokers moved under banks when the SAFE Act came into effect. This is because bank loan officers don’t have the same licensing requirements as mortgage brokers. “As a broker, you’re limited on your compensation. … But when you’re a correspondent or a banker you don’t have to have any set compensation with the lender,” he said. “It’s more profitable and advantageous to do that for some companies.”

Bottom line, mortgage brokers have been forced to get creative in recent years due to increased regulation. This has been both good and bad. There were a lot of crimes that occurred pre-crisis that were perpetuated by unscrupulous brokers that put consumers into bad loans or in homes they couldn’t afford. However, overregulation has made it difficult for the U.S. consumer to get any kind of loan, mortgage or otherwise. Government meddling is always short-sighted and creates lots of losers and few winners. New regulations have made it impossible for mortgage brokers to compete and have empowered monstrous financial institutions even more. What is your opinion on this controversial topic?

@Ellis San Jose remember this is just for CA. Each State has it's own interpretation of the SAFE Act. This is just California's.

Unfortunately, in CA, you are to be a licensed real estate brokerage to do hard money brokering. It doesn't fall under the NMLS. You will see that Norris has his CA Real Estate brokerage. He does loans under that.

I think it just takes a phone call to the Division of Real Estate or Mortgage Lending at the State level. They will tell you. If you're lending out other people's money, I think it's pretty important to make sure you aren't operating illegally, for the sake of your investors who depend on you to know. Most investors who are doing trust deed investing don't know about these new requirements. It only takes one complaint, by one disgruntled borrower over a trivial disagreement to get you on Big Brother's radar. Ask Bruce Norris of the Norris Group about licensing reqs in CA for hard money brokers like himself. He certainly knows the right answer. He's brokering millions and millions of dollars in trust deeds each year in CA. Thanks for your comments all !!!

Some hard money lenders and brokers may have to comply with new licensing requirements for lending on residential property. Depending on what State you are working in, if you are lending your own money on residential property, you may be required to be licensed. As a hard money broker on these transactions, the same may apply. But how and why?

Under the Consumer Financial Protection Bureau set up under Dodd Frank, those conducting the business of residential mortgage loans may be under new obligations to become licensed. For example, in the State of Nevada, if you are a hard money lender, even if you are lending your own money on residential property 1 to 4 units, you must be licensed under the SAFE Act under the Division of Mortgage Lending in Nevada. And if you are a hard money broker on such transactions, you must also be licensed.

But again, each State has taken a different line in response to this. If you are hard money lender or a hard money broker and you are unsure, contact the Division of Mortgage Lending and/or the Division of Real Estate at your State level to inquire. Tell them what business activities you are engaging in, and inquire about licensing requirements. You may be shocked to find out that you may need a license.

enough said ! I had to vent !!!!

Every day in the private money lending industry and in real estate investing, I see so many people that just want something for nothing. I like to call these people, the “something for nothing crew.” More and more it becomes evident that one of the biggest problems in our society is the mentality of “something for nothing.” Most people want to do the least amount of work, for the biggest possible gain. Maybe this is just a plague of human nature, but it’s very prevalent in my industry and in real estate investing in general.

Here are just two examples. The first example is the “joker broker” in the private money lending industry. These “joker brokers” all want something for nothing. These types are likely old mortgage brokers that have decided to start doing hard money loans on the side. They always create a long broker chain of 3-4 brokers, because none of them really know who the direct lenders are. They just send the loan to another broker, who sends it to another broker, who sends it to yet another broker. Then they all want to get paid an excessive amount of money for NOTHING. The other day I was approached by a broker to make a large loan of $5 MM. There were 3 brokers in that chain already behind the broker that brought us the deal. The best part? They wanted 2% of the loan amount ($100,000) for just giving us a name and a phone number. These are the types of brokers that I just want to tell to take a flying leap. This is a perfect example of wanting something for nothing.

Here’s another example. I received a loan request yesterday from an individual who wanted a loan. He got a property under contract for $440,000 that he said is worth $750,000. He told me it just needs some cleanup and minor repairs totaling $5,000 and he would be able to sell it for $750,000. But then he wants us to give him a loan for the whole purchase price, the repairs, the loan fees, and the closing costs without bringing in ANY cash of his own. When I told him he would need to bring in some of his own cash to close on the transaction, he got angry. “Don’t you realize what a great deal this is??!!” he shouted at me through the phone. Just to summarize, this individual wants us to put up all the money on this deal, take on all the risk, so he can make $300,000? What a joke.

Any other examples you would share of the “something for nothing” mentality. I’ll tell you what, this type of mentality just makes my blood boil…..

Privlo is a new lending platform that connects homeowners who can’t qualify at the bank, with private money lenders. But once the website actually launches, will Privlo be in compliance with new regulations under the SAFE Act?

Depending on which State the property is located in, if it is classified as residential 1 to 4 units, Privlo may be skirting a new licensing requirement under the SAFE Act. For example in California, even if you’re lending your own money on residential real estate, 1 to 4 units, you must run your loans under a licensed California broker.

Privlo, a California If Privlo is a licensed real estate brokerage in the State of California, they can make a commission or flat fee on transactions fused on their website for properties located in California. So what about all of these other lending platforms? Are they in compliance with the SAFE Act? Probably not. Depending on which State the property is located, if it’s a residential property 1 to 4 units, there may be a licensing requirement for brokering such a transaction, even if it takes place online. So what will lending platforms like Privlo do about the requirements for licensing under the SAFE Act? With over $2 MM in funding, Privlo better get clear on this before it launches to the world. (Read the full article here: http://www.inman.com/2013/05/02/privlo-lands-2-1m-in-seed-funding/)

Newby real estate investor came to me for rehab loan recently for a property in Westbury, NY. He just inherited a great house in Long Island. House needs a full gut rehab, but he just wants to get a Cert of Occ., doesn’t want to flip it. He plans to hold it as a long-term rental.

Any rehabbers who are active in this area of NY, can you please send me the names of some good rehab contractors you’ve worked with? Thanks for the help.