How to know if a lending company is legit

Question

I have recently came across a “direct private lender” that claims to be from a company named Inclusive Properties. The website is very basic with not much info or content. I inquired and set up a phone call, after speaking on the phone they quickly offered to move forward with a very large asset based loan but they didn’t ask any details about the property I’m looking to purchase. It smells fishy to me and I know typically if it’s too good to be true it probably is. But my question is, how do I find out if they are a legit lender or not? I would hate to assume they are and miss my shot at closing on a great deal.

Thanks in advance for any help!

Jay Hinrichs · Answer

just becasue they are on BP does not give them a pass.. many scammers troll BP just like they troll linkdin  facebook connected investors etc. I mean look at it realistically if your going to be looking for borrowers to scam what better place than a real estate website like this one.. its the mother of all opportunities for scammers.. its free and you have a ton of beginners who dont know what they dont know.

its just great that you asked and questioned it.

Kyle J. · Answer

@Andrew Flora  Not asking any details about the property before agreeing to move forward with the loan would certainly be a huge red flag.  Also, just so you know, even the lenders who advertise on BP are not vetted, so don't assume just because they contacted you through BP that they're legit.

As for how to check if they are legit, ask them if they are licensed and - if they are - what their license number is and what name they're licensed under (and what name they lend under in case that's different).

You should then be able to verify their license with the regulatory agency in their state and also likely here: http://www.nmlsconsumeraccess.org/.  (The NMLS has a list of all the  state-licensed and registered mortgage companies, branches and mortgage loan originators in most states.  You can see a list of all the participating states here: https://mortgage.nationwidelicensingsystem.org/consumer/NMLS%20Document%20Library/NMLS%20Consumer%20Access%20State%20Participation%20Chart.pdf.)

Lastly, one of the best ways (in my opinion) to verify if they're a legit lender or not is just to ask them where they've previously done loans, and then check with the County Recorder in that county and see if there is any record of them being named on deeds of trust or mortgages, which can usually be done online in a matter of minutes.

Patricia Steiner · Answer

All lenders must be licensed - including hard money lenders:  "Hard money lenders are typically regulated at the state level via the Department of Real Estate, as at least one person associated with hard money lending must have a valid Real Estate Broker License. Additional licensing requirements may be required on a state-by-state basis."

My recommendation:

1.  Ask what state(s) they are licensed to do business and ask for their license number.

2.  Verify the information online via the Secretary of State Office.

3.  Don't give any information; let them sell you while you search for their license online.

And, thanks to all the BiggerPockets contributors who outed the "lender" who wasn't last week.  I appreciated the information.

Steve Vaughan · Answer

Direct private lenders are people you know.

Random lenders on the internet are hard money lenders at best.

My guess is you will need to change your phone number within 6 months.  The call and text spam you just unleashed on yourself is going to kill you.  Don't call these things from your actual phone number.

Justin Kane · Answer

if it feels wrong.. always.. always.. trust your gut there are so many legit lenders out there

Jay Hinrichs · Answer

absolutely Kyle its gone from bigger sophisticated shops ( I have heard of clones of these companies in the US) to small time fish who are scamming people 500.00 at a time and as much as they can get out of them.. not a day or week goes by on BP.

they run adds for under market interest  advertise no money down..  NO credit.. even will put in there no payments  LOL.. so those who simply don't know that this is not real respond to them. thinking it is real..  then on BP occasionally they will ping you on PM and say hey I am a lender.. and they go through there script and their scam.. its pretty comical to those in the know but I can see how those that are newer get sucked into it.. there is an agent here in Vegas who I know was brave enough to post that he had been taken.   And in NV you need to be licensed state and NMLS to lend in this state. and you see all these guys that say they lend in 50 states and other than the very largest no one lends in all 50 states that's a huge red flag.. they just don't have the demand to get a license in North Dakota which requires one..  you see that on TRUE HML websites markets they service and its usually all the states were no license is required for non owner occ commercial purpose loans.  IN CA as you know real estate broker  CFS  and or NMLS and state originator license is required you need one of those.. now there are carve outs in for small investors who can do say 3 loans a year.. without a license but if its someone advertising they are in the business..

Jay Hinrichs · Answer

Patricia this is true in 12 states.. however for NON owner occ commercial purpose loans the rest of the states no license or brokers license required.. and the ONLY state i know that allows a RE broker to do loans is Califorina were I am a broker and used that licensed to do hundreds of loans for my company.  But agree good place to start.. and if any private or HML says they are licensed in all 50 states that is a big red flag.. most might be in a lot of states but most are not in all 50..

Jay Hinrichs · Answer

http://www.nmlsconsumeraccess.org/Home.aspx/SubSea...

as @Kyle J. said use NMLS for instance pop my name in Jay Hinrichs and see what comes up and how easy it is to verify.

although at the moment I am inactive ..

Jay Hinrichs · Answer

Lastly pop on American Greeds website  ( the TV show) and then pop in Remington financial watch that episode this is the mother of all pump and dump due diligence companies its a great article

@Kyle J.  and Kyle as a N CA guy you probably know Clearlake CA.. and the subject of this that took them down was a lady from Marin county wanted to build a retreat of sorts on an Island in Clearlake that could never in a thousand years be developed.. i knew the guys that owned it and tried and failed to develop it before she came along.

I ran into Remington right out of the great GFC and sent them a one pager on a program i wanted to do personally it was fairly complicated.. and since I have decades of lending experience behind me.. they were way to quick to approve me subject to me sending them 10k for due diligence.. did not ask enough questions and this was not a straight forward remodel loan or buy hold loan. it was a semi complicated financing model..

Andrew Flora · Answer

Thank you Patricia,  this is the answer I was looking for!

How to know if a lending company is legit

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