Foreclosure. - Posted by TRAVIS (Md)

Posted by Robin in FL on August 22, 2005 at 18:22:43:

Where can I find the “rules” to avoid being a “predatory” private lender if I want to lend to an owner occupant on a second mortgage to bring them current on their defaulted first mortgage? They have a good job, and enough equity in the house, They just need a short term loan to get them current. I need help finding the top interest, points and fees I can charge. Also, how short a balloon can I make it? Thanks for any help.

Foreclosure. - Posted by TRAVIS (Md)

Posted by TRAVIS (Md) on July 10, 2002 at 08:32:49:

Homeowner is facing foreclosure on their home but they have about 20k in equity in that home. They want to save their home from foreclosure but every lender that they have spoken too has not been able to do anything for them. If any knows of a good lender familiar with this type of situation and won’t kill them on the interest rate, please respond.

Re: Foreclosure. - Posted by Ed Garcia

Posted by Ed Garcia on July 10, 2002 at 09:55:56:


Good luck in obtaining a lender. I would also like to bring to your attention that when you tell us that the borrower is in FORECLOSURE and then you ask for competitive rates. These two don’t go hand in hand.

In California, right now the big thing is Predatory lending. The whole idea of predatory lending is to not let borrowers with bad credit, become prey to lenders who take advantage of them by charging high points and interest rates, therefore jeopardizing their house.

I personally feel that this is counterproductive. Hard Money Lenders and Sub-prime lenders, lend money to borrowers who can’t qualify or fit into conforming lending. Usually the reason is BAD CREDIT. So they are taking chances with borrowers that conforming lenders won’t.

That being the case, if these borrowers can’t obtain funding to refinance their house, they’re going to lose their house for sure.

Hard Money Financing is like any other business; it’s based on Risk/Reward. These lenders take a bigger risk, and therefore they want a bigger reward.

These loans are based on equity allowing the borrower to buy time to either pay and save the equity in their home, or to give them more time to market their property and get a fair price.

I can’t tell you through the years, how many Hard Money Loans I’ve made knowing that I’ve save the borrowers house. They were going to lose it to foreclosure and there was no one there to bail them out. Now those borrowers have no place to turn to for funding and are either going to lose their house by foreclosure, or be forced to sell their house.

If they are put into a forced sale, they have no time to test the market and get a fair price.

For me this is sad. On the other hand it’s good for investors. Hard Money Lending will now switch gears and concentrate on financing for investors. Predatory lending does not effect none owner occupied homes. In California Hard Money Lenders are already restructuring to finance NOO homes or small commercial properties. This is a much needed type of financing that got lost when the T&L’s (Thrift and Loans) lost their thrift insurance and had to conform to financing regulations of the FDIC. The result was the stronger T&L’s became banks, the smaller ones went out of business.

Ed Garcia