Beware of unscrupulous lenders

[Paul Tomlinson]

Beware of unscrupulous lenders

I am posting this over several real estate investment forums that the lender in question participates. All statements are of fact.

First of all, I have to say that most lenders that I've dealt with or spoken to in the past provide a great service to homebuyers and investors alike. There comes a time when you get the REI bug, you've read through the forums, read multiple books, spoken to a mentor or two, and make your first offer…. or two. That was my case. I hadn't lined up my team yet (lenders, title companies, contractors, attorneys, etc…) but I couldn't stand back any longer when I was finding deals that made sense. Heck, I was willing to make the leap even without a job. I was laid off from a large corporation and jobs were paying 2/3rds of what I used to make. Arghhhh.

The first property was out of state. A property that had just been rehabbed by a gentleman that had it under contract with the homeowner and would eventually pay the homeowner after rehab was complete, and after the property was sold. That is where I come in. The property was being sold for $58,500, had comps of $65,000 but better yet could be rented about $150-$200 per month above mortgage, taxes, insurance, etc… The gentleman recommended a private lender. The application was completed, I was approved, and the sum of $500 was sent to Chris Macone (Macone Enterprises) and $500 to his consultant. You can find Chris on this forum as well as a few others on the internet.

I decided to go the same route with my 2nd property. This one seemed like an even better deal yet. The property (duplex) is in need of rehab with a purchase price of $28,500, needs about $15,000 to $18,000 of rehab and has comps of $65,000. This time Chris asked for $500 as a consultation fee.

After not closing on the first property after 4 weeks or so, we (the seller and I of the first property) started to question what was going on with the loans and the closing. Chris knew the seller was under a deadline due to arrangements made with the homeowner of the property and told the seller that the closing could happen in 2 weeks. Chris Macone assured us that everything was “going smoothly” and that the paperwork was at the attorney’s office at this time. The attorney was contacted and he stated that Chris (and/or his consultant) had sent in paperwork that did not make sense. Chris replied that he had fired the attorney. Fantastic. The seller had a deadline of February 6th and needed to close or he would lose the house and worse yet the $8000 or so that he put into the house as well as the increase in house worth. So (quick thinking), the seller conferenced Chris in with his title company. They were told that as soon as the paperwork arrives, they could close in a matter of days. Chris agreed to that. After being contacted a couple of days later to see if the paperwork had been turned over to the title company, Chris said that the original attorney was back to working on the closing and that he (Chris Macone) would no longer be involved in the closing. Hmmmm. Why?

The attorney was called by the seller. It seems that 3 people had walked out recently on their closings. Although I did not get this first hand, it seems as though Chris was working with discounted notes. All along I asked Chris to provide details of the loan.

Look up RESPA and you will see that once the application is completed, the lender has 3 days to provide full disclosure of the loan. I sent email after email inquiring as to the fees involved with no response from Chris Macone. The attorney stated that Chris wanted the loan written for $71,250. I asked Chris who was going to get the difference between the purchase price of $58,500 and the loan amount of $71,250? No response from Chris. No response after multiple emails. The attorney would not complete the paperwork because the SFH would not appraise for the loan amount that Chris (or his consultant) suggested.

The attorney also responded that he had not received any paperwork as it relates to the 2nd piece of property that I was purchasing either. I immediately asked for a full refund of all consultation fees. I originally sent the first two money orders on 11/15/05. The second was mailed on or about 12/4/05. Obviously neither property closed. Chris refused to refund monies stating that services had been performed.

Chris may refute my statements. That is fine. I’ve saved all emails/correspondence as it relates to the attempted purchase of both properties as well as copies of money orders mailed out.

Again, statements all statements are factual.

I’ve filed a complaint with the Attorney General for the State of Texas because Chris Macone did not provide disclosure of the loan within 3 days of receipt of application (RESPA).

I am only making this post to make folks aware that there may be some unscrupulous lenders amongst us. Not to scare anyone or by no means to lump all lenders into one group but please ask for references when dealing with private or hard money lenders.

As it stands, my potential first investment property which needs to close by February 6, 2006 is in great jeopardy (the seller may be out of a great sum of money for both the loss of rehab money and the money he stood to make on the deal) and the 2nd investment property has a contract that expires on January 18, 2006. If anyone has ideas on how I can make this work, I’d appreciate it if you could PM me.

Paul Tomlinson