{"id":866,"date":"2007-01-07T14:49:51","date_gmt":"2007-01-07T21:49:51","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=866"},"modified":"2007-01-24T14:49:46","modified_gmt":"2007-01-24T21:49:46","slug":"hard-money-life-as-a-legal-loan-shark","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/866\/hard-money-life-as-a-legal-loan-shark\/","title":{"rendered":"HARD MONEY: Life as a Legal Loan Shark"},"content":{"rendered":"

Loan broking in the private mortgage marketplace can be the most rewarding sector of the lending. I have helped families who faced foreclosure due to unforeseen negative events. I’ve watched a businesswoman land a huge contract because she could access quick capital. I’ve beamed with pride as a property investor turned around a dilapidated multi-family complex and provided quality housing for 20 families.<\/p>\n

None of these positive events came to fruition with out the loan shark. The “loan shark” is a pejorative term accorded to participants in this industry. The loan broker charges relatively high points or fees and the private investor (or lender) charges high rates. I offer you an explanation for the expensive terms these loans offer:<\/p>\n

1- This market is diminutive when compared to the amount of capital available in the secondary mortgage markets<\/a>. The loan broker has a finite amount of capital available to him because these loans are held for investment by the private lender and not securitized. The economic principle of scarcity of supply applies in this market. A loan broker who specializes in this market may only have five to ten million dollars available each year to lend. Origination fees of 3% to 6% are not uncommon because of the scarcity of capital.<\/p>\n

2- The private mortgage lender has many other investment options available to her. Investing in a mortgage-backed securities pool, guaranteed by a government agency (like a Ginnie Mae pass-through security<\/a>) is going to yield approximately 6% in today’s environment. There is no risk of default to that investor because an agency of the US Government guarantees those loans . If we start with 6% as a baseline (and zero default rate), it becomes apparent why yields of 10-14% are not uncommon for the risk the private lender takes (default rate for private mortgage loans can be as high as 8-10%). Default brings unwanted complications for the private mortgage investor: temporary loss of income, legal action, and eventual disposal of the collateral.<\/p>\n

Responsibility in the underwriting of these loans becomes more important because a loan broker is dealing with an individual investor’s nest egg, not an Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Loan broking in the private mortgage marketplace can be the most rewarding sector of the lending. I have helped families who faced foreclosure due to unforeseen negative events. I’ve watched a businesswoman land a huge contract because she could access quick capital. I’ve beamed with pride as a property investor turned around a dilapidated multi-family […]<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[7,8],"tags":[],"class_list":{"0":"post-866","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-enduring-interest","7":"category-investment","9":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":1356,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1356\/subprime-loans-disappeared-learn-how-to-be-a-hard-money-loan-broker\/","url_meta":{"origin":866,"position":0},"title":"Subprime Loans Disappeared? Learn How to be a Hard Money Loan Broker","author":"Brian Brady","date":"April 27, 2007","format":false,"excerpt":"Loan originators who have based their business on subprime mortgage products have been feeling the pinch in 2007. Private mortgages or hard money lending may be the solution to your problem. Four originators gathered with three hard money lenders in our podcast. The Lenders: Mitch Zeichner (310) 948-2622 Mitch represents\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6180,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/6180\/workable-real-estate-deals-may-require-even-more-creativity\/","url_meta":{"origin":866,"position":1},"title":"Workable real estate deals may require even more creativity","author":"Greg Swann","date":"December 20, 2008","format":false,"excerpt":"This is my column for this week from the Arizona Republic (permanent link). \u00a0Workable real estate deals may require even more creativity I do a lot of work with buy-and-hold rental home investors, more and more of whom are able to come into Phoenix with all-cash offers. Poor me, I\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2344,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2344\/happy-homeowners-act-of-2008\/","url_meta":{"origin":866,"position":2},"title":"Happy Homeowners Act of 2008","author":"Brian Brady","date":"December 8, 2007","format":false,"excerpt":"I'm thinking of getting into politics. I've been watching testimonies, from both sides of the aisle, about the credit crunch and impending doom of mass foreclosures. I figured out the problem: The housing prices were too damned high. Now, my stance, to this point, has been pretty clear; let the\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":5374,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/5374\/restoring-a-bargain-priced-lender-owned-home-is-easy-if-you-have-cash-but-a-hud-203k-rehab-loan-makes-it-easy-even-if-you-dont\/","url_meta":{"origin":866,"position":3},"title":"Restoring a bargain-priced lender-owned home is easy — if you have cash — but a HUD 203k rehab loan makes it easy even if you don’t","author":"Greg Swann","date":"November 1, 2008","format":false,"excerpt":"This is my column for this week from the Arizona Republic (permanent link). \u00a0Restoring a bargain-priced lender-owned home is easy -- if you have cash -- but a HUD 203k rehab loan makes it easy even is you don't Last week we talked about troubled homes and how they can\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":7569,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/7569\/the-bad-bank-plancomplete-with-music-and-video\/","url_meta":{"origin":866,"position":4},"title":"The “Bad Bank” Plan…..(complete with music and video)","author":"Tom Vanderwell","date":"March 23, 2009","format":false,"excerpt":"I've copied the announcement from the Treasury that sent the markets on a moonrocket today and thought that I would \"walk you through it\" so that we can get a better feel for whether this is a relief rally or something sustainable (and therefore what it means for mortgage rates).\u00a0\u00a0\u2026","rel":"","context":"In "Group Therapy"","block_context":{"text":"Group Therapy","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/group-therapy\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/straighttalkaboutmortgages.com\/wp-content\/uploads\/2009\/03\/ppip-chart.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":11505,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/11505\/in-defense-of-home-loan-cramdown\/","url_meta":{"origin":866,"position":5},"title":"In defense of home loan cramdown!","author":"Damon Chetson","date":"March 9, 2010","format":false,"excerpt":"Al's got a post up about the latest effort to get us out the housing mess. The feds are rolling out HAFA, set to take effect April 5, which will solve all of our problems! by giving financial incentives! for borrowers, servicers, and investors! In exchange, creditors must release borrowers\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/866","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=866"}],"version-history":[{"count":0,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/866\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=866"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=866"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=866"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}