Laws of Attraction

You know the saying "Birds of a Feather Flock Together". We can see this with the recent subprime and Alt-A implosion which was caused by poor underwriting by the lenders, fraudulent appraisals pushing values and brokers more worried about their commission rather than submitted good, qualified borrowers for financing. It's no wonder that the majority of the subprime and Alt-A lenders imploded and the ones left are getting out of the wholesale business. Lenders feel that they have more control when they deal directly with the borrower instead of having an intermediary between them and the borrower.

This leads us to the new lending arena which I phrase as the NextGEN Lending arena in which you have a true partnership between the broker and lender working towards a common goal, funding good, qualified borrowers that are able and willing to meet their mortgage obligations.

Over at Bridgelock Capital, they are steering into a new direction in forming a partnership with quality brokers that understand the importance with their relationship with the lender. Brokers need to be involved with the lender through the life of the loan and fully incorporate a "Client for Life" mentality. Over at Bridgelock Capital, we are a hard money lender offering transitional capital to borrowers experiencing financial difficulties. The way we differ is that we want to work with the borrowers to implement a credit management service that helps the borrowers improve their credit rating and help with the negotiation of their debt. We want to help borrowers obtain a new beginning and transition them into better financing down the road.

Brokers working with Bridgelock Capital need to understand that when they bring a client to us, we look to incorporating the broker throughout the loan process and if our loan becomes delinquent, we ask the broker to get more involved. With this mentality, we have a true partnership between the lender and broker.

I urge all brokers to join us in this new ideology, the NextGEN Lending arena.

What sort of credit and financial stability does a Hard Money Lender require from the borrower?

Many hard money lenders have specific underwriting guidelines, you will see that NextGEN Hard Money Lenders will many times underwrite a file with a common sense approach. Some hard money lenders might call this out-of-the-box underwriting, but NextGEN lenders just view this as a great way to provide creative solutions for customers. As far as credit, their some hard money that do not look for a perfect credit score. Some hard money lenders do look for patterns of payment over time and understand that everyone encounters financial hardship at sometime in their life. A great company would want to be there to help your borrower and help transition them into better times, this is the common thread among NextGEN hard money lenders.

When Will Appraisals Be Worth More Than The Paper They Are On?

Although I've been in the hard money lending business for quite some time and have never relied on selling my loans to another investor (institutions and/or wall street), it still amazes me with the lack of integrity appraisers have and the fall of the subprime market and securitization in general. They are still pushing values even in todays market climate. There isn't a day that goes by when I don't see appraisers pushing values. How can someone say a value is based on a sale 7 months ago in this down market environment? And better yet, using comps over a mile away in a conforming neighborhood when there are listings next door to the subject property 20-30% less than the appraisal.

I just want to say - wake up appraisers and start valuing properties correctly since the NextGEN lenders will critically analyze the trustworthiness of the appraisal. As if you didn't know already, you need to start taking into consideration the following for valuations:

• Comps within the same neighborhood
• Recent sales within 45 days or less
• Current listings - this includes both retail listings and REOs
• Be objective and quit listening to brokers regarding what value needs to be at. It is your job to let them know what the value is
• Days on market - if a property isn't selling then obviously the property isn't listed at the correct price and needs to be reduced

Appraisers owe it to their clients (i.e. borrowers, brokers and lenders) to keep expectations in check and value the property correctly. The industry really needs to keep a score card on appraiser's accuracy in determining true value. Remember, the fall of the Subprime and securitization can be partly blamed on quality of appraisals. You owe it to yourself to help rebuild the trust within the appraisal system. The rise of the NextGEN lenders will be keeping a close eye on value.

What is the most common use for private money (aka hard money or private equity lender)?

The most common loans for hard money are typically sub-500 borrowers, foreclosure bailouts, bankruptcy buyouts, non-conforming borrowers needing to go stated income, have an existing notice of sale (NOS) or notice of default (NOD), need quick cash-out or just doesn’t meet conventional underwriting guidelines. There are many reasons why borrowers need access to private money, in fact, private money is now becoming the new sub-prime lender, known as NextGEN, with the recent market turmoil. NextGEN lenders are willing to help their clients get through the hard times and be a path to a solution and financial freedom.

What are private money interest rates?

Private money rates generally range from 10% to 15%. The rate is determined by looking at a combination of factors: (a) LTV ratio, (b) strength of borrower, (c) condition/desirability of property, (d) actual cash-in or real equity contributed by borrower. Typically our rates fall in the 11%-13% range.

What is Private Money used for?

Private money is generally used as a bridge: a way to get from point A to point B. It is generally a short to medium term solution (1-6 years) and there is nearly always an exit strategy going in. It is used for all types of real estate secured financing: commercial retail, restaurants, hotels/motels, marinas, elder care facilities, industrial, agricultural, raw land, land development, construction, rehab, multi-family and even single family homes.