What are some frustrations you've had when dealing with a hard money lender?

[Katie Smith]

Hi there! I'm just curious to hear about what issues/frustrations/positives you've had while dealing with a hard money lender. 

[Doug Smith]

I came from the lending/banking world, but what I noticed about most bridge lenders (our polite word for hard money) is that most come from one of two fields...real estate or "investment banking" (capital raisers). The vast majority do not have formal credit backgrounds. They tend to know how to raise capital, but not how to underwrite a loan in a "makes sense" manner. Case in point...I just closed a deal for a professional athlete that I brokered through a company I'll never use again where they required that my client have a CPA write a letter that the customer's financial position will not be negatively impacted by making the loan. The guarantor (the borrower was a new LLC to hold the property) is a professional athlete with literally no debt making over $10 million/year with bank statements we provided with over $4 million on deposit. It was for a loan of $288K at 65% LTC deal for a property. It made no underwriting sense whatsoever, but we struggle with them simply understanding basic credit underwriting. The closing was delayed by about 10 days until we could jump through hoops to meet the silly fire drills we had to go through. The really rears its ugly head when the "investors" (the hedge fund backing the securitization of the deal) do their QC review and ask for crazy, nonsensical conditions at the very end of the process. That's our biggest challenge. We really have to understand up front what each lender is going to want to see and then we pair the customer with "the path of least resistance" fund to back the deal. End of rant. We usually make it smooth and invisible to the customer, but getting past silly conditions is perhaps the biggest challenge.