I have a potential borrower asking for a HML. Our good friend and mentor Jay Hinrichs suggested using the 3 C's for underwriting: character of the borrower, capacity to repay the loan, and of course, the collateral.
Here is the scenario: potential borrower has property under contract for 200K. I offered him a loan provided I get 1st lien, etc. I went by his office to scope it out. Nice place. He says he has been there 3 years. Looked very professional. He showed me a few properties he currently owns (on the county property appraisers website). So, all this looks good.......THEN, I started asking around to a few people that have been around a long time. The feedback was pretty negative. One person did tell me they would do the deal (the numbers look safe) but to make sure I dotted the i's, crossed my T's, had 1st lien position, and had an attorney draft everything including a personal guarantee. My issue is: character!  Am I messing up taking on this person. If I strictly follow Jay, then it would be a pass, One note: though I got pretty negative feedback, I don't have any way to validate what was said, and nothing in particular was mentioned other than "be careful", "watch out", etc. 

@Jay Hinrichs what do you say my friend? I do realize this isn't the only guy in town that wants money....but....I was hoping to establish a good relationship with him and do more deals in the future. I already told him, in specific language, that I sever relationships with borrowers that fail to pay on time, etc. 

p.s...this potential borrower has a property under contract for 200K and I told him I would do 65% loan to purchase price. That would put me in at 130K and I don't believe there is ANY way to lose on the collateral if it came down to a foreclosure auction.