The bankers code

[Bill Schultz]

Has anyone seen this course? Something about obtaining private money and re-lending it at a higher rate. I would love to hear some reviews.

[Jackson Maia]

Originally posted by @Ron Steele:

Thanks for the info?

I understand raising capital. Could you or anyone provide any resources or examples to learn more about this.

I don't understand why someone would loan me $ at ex 6% no collateral then I loan at 10% hard money which would be ltv of 65% or lower, secured by collateral (real estate),plus points. The other points is lending on what??? my credit,sales pitch, ???

The only way I can see getting these terms are traditional financing which would highly doubtful/impossible I would think.

I thought maybe a line of credit would work(I have a small one) but I don't know if the spread would make sense. I'm not sure what I'm paying on interest, but my loans would have to have a much higher rate. Also it seems you would have to have a pretty big line of credit.

I'm looking for any answers anybody could provide, and thanks in advance for your help.

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Here is what happens the Borrower make a good presentation pitch, he never touches the money it is violation of SEC because the money is not yet secured. He will get the Private lenders to open a self direct IRA account and have the money ready to be sent to a closing table to close on a property. At the closing table there will be a corporation which was structured to handle the profits dispersion in percentages. Lets say the Borrower tells the private lender to send 100k to the closing table and agreed to receive 6% within a year, then the contract will stipulate that when the property is sold and profits are made the 100k + 6% interest will be sent to the Private lender's IRA account which is rolled into a Roth IRA which is Tax free and the other 4% or whatever spread will go to the guy who pitched the lender and made the agreement for the 6%, meanwhile he has other agreements between the other partners which stipulates that this 100k is being lent at a 10% interest and when the money are divided he gets his 4% passive income. It all becomes much more lucrative when you get several lenders to use for commercial investments instead of residential. Its all legit but be careful not to violate ant SEC laws or any other laws which govern your specific state.

[Mark Rios]

I purchased the course from ebay, which consists of the live audio recordings, some sample docs and the 3-day event PPTs..

My understanding is the course is based on fairly high level note and trust deed knowledge. It involves wraps or AITDs, sometimes hypothecation, some shared appreciation mortgages (equity kickers). What follows is a simplified version that has been translated through my limited vocabulary and math skills. I do have experience in mortgages and note purchases as well as levering notes via hypothecation.

You really need to have an idea on how mortgage/trust deed law works and have someone on your team of 3rd party providers who knows how to draw up these type of uncommon, but completely legal, types of security instruments and notes. TBC recommends using a mortgage broker to write up the notes and TDs/Mortgages. In fact TBC recommends you rely on your 3rd parties heavily and remain strictly as a lender.

TBC recommends all the transactions (in the beginning) only be made on NOO investor loans on SFR 1-4 type properties. 6-12 mos, velocity type hard money loans. A big feature to remain compliant is to establish a relationship with at least 3 hard money brokers who know how private lending works, before even moving past go. This is very important. During your meeting, you will find out your hard money brokers parameters, how they work, if the use private money or institutional capital, rates, points they expect, lien positions they'll entertain, will they service the loans etc..

One VERY basic transaction involves agreeing to lend no more than 65% LTV (of a $100,000 purchase price) to a borrower who agrees to 12% I/O and 4 points. You let your hard money broker know you have a deal, the total loan amount is 65,000. You then ask your broker if they will do a first at $58,500 and 10% I/O (58.5% LTV ) and you will come in with a $6500 (65% CLTV) second lien. Broker gets the points for taking the application, writing up the docs and processing etc..Doing this keeps the loan compliant. It's VERY VERY important to go through a broker for qualifying etc.. Pass your borrower to your broker to get processed. Don't take the app or pull credit etc.

There are a few ways this can split from here, but an interesting scenario involves you telling your broker that you want the second lien to be an AITD (wraparound mortgage) of the total $65,000. Basically wrapping up the broker's first and your $6.5k second. You get the arbitrage on the payments, unless you ask for discount points. Both front and back-end points will affect your yield positively. Especially if you truly turn the loans within 6 mos. to a year.

There is also an opportunity to use an AITD with a shared appreciation mortgage, where you maybe take a piece of the profits at sale or refinance in exchange for a higher LTV or other concession.

Servicing is setup on the wrap to get the full monthly payment on the $65,000 loan, with the underlying first payment being paid, then the balance of the payments being paid to you on the 2nd.

A basic basic sample might look something like this:

• $65,000 loan amount at 12% I/O
• Payments $650 month
• Broker's 1st lien for $58,500 - 10% I/O -- $487.50 mo or $5850 yr..
• Your 2nd lien for $6500 -- Rate arbitrage balance $162.50 mo or $1950 yr.

It's important in this course to always compare loan constant, yields, as well as rates. Where as most will look just at the rates and try to arbitrage solely on that.

Looking at your yield on the spread, you receive $1950 after 12 mos. -- a 30% yield on your money.

What if you receive one discount point at closing on the entire deal? Just because you’re a private lender and you can. One point of $65k would be $650. At 12 months, your yield on your initial investment of $6500 just jumped to $2600 or 40%.

Now what if you borrowed your initial investment of $6500 at 15%? That’s $975 that you owe annually, reducing your 12 mo. yield to $1625 or 25%.

There are many more ways, aside from using a wrap to make this work, including additional yield plays like an equity kicker.

There’s a reason this is called The Banker’s Code. If you’ve watched Money As Debt, you’ll see how banker money works, creating cash out of thin air.

This is just the beginnings of my understanding on this and I am no expert, though I do work in loans.

A couple things come up for me. Finding good, ethical mortgage brokers that understand the way you work and are willing to stay on with you as a lender while you bring them solid, low LTV borrowers. I don't see, however, many institutional lenders allowing a 2nd lien behind their senior lien. So if your hard money broker happens to source institutional funds as senior debt, the AITD strategy or even a 2nd lien won't work. So that's something to verify with your broker, if they originate or allow 2nds.

I also see the need to stay within Dodd Frank and the SAFE act by letting the licensed mortgage broker originate these loans. There may be some overkill and uncertainty if or what types are licensing are needed, so a good RE and/or securities attorney is needed to figure that out in your locality.

I also see some possible disconnect with some areas of this type of deal when you have borrowers, brokers or title agents who simply can't or won't understand some of these types of notes and trust deeds/mortgages. What we don't understand, we reject. And if you've ever tried to present a creative deal to a residential realtor, you can see the possible difficulty. TBC's strategies rely on a certain type of timing and sequence as well as working with professionals with experience in alternative ways of working with paper.

Have fun..once again I'm not a part of TBC, I don't work for them and have a VERY basic understanding of this course and how it works. I'd love feedback on the enormous amount I may have missed.

Thanks for indulging the long post..

[Boyd McClean]

@Mark Rios you are exactly right in your summation. If you go to the live class they teach  all that you mentioned, but hard sell a $10,000 mentoring program. I enjoyed the live presentation yet at the last day I got turned off with their constant rhetoric of the $10,000 program. It is ok to mention it and give the benefits but not constantly hammer you. Being a captive audience they take advantage of that.

It is a challenge to find a MLO that will agree to what you want to do. I got a email list from my State Banking Commission and emailed several hundred registered MLO folks and found many were MLO's for banks and they perceived my offer a conflict of interest.

I did find someone qualified 75 miles from my market, yet did not like his attitude so passed him by.

Since taking the class I have underwritten several small dollar amounts myself (NOO) having a real estate attorney review all paper work prior to moving forward. Having done due diligence on second non-performing notes I have all the tools and necessary data bases to do the underwriting.

One must be very much aware of changing market conditions in your area. Several hard money lenders (n my area) that go 70-80% LTV are now having challenges of large dollar loans being late in interest payments (they only held back 4 out of 6 months interest). Inventory in my area in the last 60 days has grown by a week. Something to keep your eye on.

There is definitely opportunity in this field, yet one needs to adhere to the guide lines they teach. So far I am funding one out of four.

[Mark Rios]

Hi Biyd,

Curious as to how the small deals you have put together were structured. Were these straight up 1st loans or did you do 2nds? Or maybe the AITD technique?

[Sabrina Brown]

I unfortunately paid into their apprentice program with big bucks.  They were teaching about trust deed programs and the irrevocable trust they promote (for a small fee for a certificate of course) was prepared by one of their lawyers.  Because the signatures were prepared at a different time, there was never a full trust document that was then certified in full.  Some were as creative and wrapped another trust around it.  For example:  there are 4 investors in one irrevocable trust.  One investor wants out, so they bring in another investor by creating another trust on top of that one.  In the end, you have no clue who is in the irrevocable trust that is being entirely mismanaged by the trustee, you get no accounting, and if you get lucky receiving interest payments, you will get them 1-2 months late.

Many deals were promoted as 1st or 2nd trusts.  There were several contractors and real estate professionals present that would bring their own deals.  Problem is that they were just out to scam people.  Many lost most or all of their money.  There was some information in these classes but they were so rare that any of us would ever get to deal with, especially without having a securities license, that it had no value.  Their expensive classes were a waste of time and money.

I am still trying to get my funds from The Legacy Group Inc, located in Colorado Springs, that was supposed to be a 6 month fix n flip deal from 2013. Everything from the start went wrong. Rehab took them over 2 years. They supposedly hired a company to oversee the rehab, hence more money, but yet, the rehab project still went wrong and dragged out. Their excuse was always that the contractor didn't do this, or was working on another project and so on. They then hired a realtor to sell the property. They were late in posting it on the MLS so we missed a huge opportunity in the spring time. When the realtor finally put it on the MLS, they posted old pictures and with the status "foreclosure" , which was still from the time we got the property back via foreclosure. It took the realtor to post "professional" pictures about a month and by then, nobody cared to look at an old MLS listing. We ended up reducing the price by about $50,000 mid January 2018. Why we used a realtor to sell at a loss is mind boggling. None of us investors have received our funds back or an accounting of transactions, which they were to provide monthly. I asked for accounting in prior years and didn't get anything. The Legacy Group is run by Randy King, Matt King, and Andrea Trout. Sending emails doesn't lead to anything, they just simply ignore you, even though they were promoting to focus on providing "excellent customer service". It's all BS.

There were two other groups that The Bankers Code promoted and most of the deals went sour, too.  Back on another deal from 2013, I finally threatened one trustee because she committed securities fraud by lying to us and deceiving us investors, she paid back the capital only, but then was hired on as a mentor by The Bankers Code.  She had no prior experience!  All they promote is scammers, even though they keep saying that they want to do honest business, yet, they continued bringing on inexperienced and useless mentors.  

Why all of these self-called "gurus" get away with the securities commission and are not investigated by the FBI, is mind boggling to me.  I can name at least 10 investors I know personally that lost money in the deals among other gurus.  Only a small percentage of students actually become successful.  The only success the gurus have is by ripping people off the money they charge.  Charge each student "only" $1,000 but get 50 to attend and voila, you have just made yourself $50,000 in one weekend (most make more than $200,000 in one weekend).  Then add all of the coaching money they upsell you because you haven't been successful and they promise you by getting their one-on-one calls you will be because "they are guiding you along the way".  You see it out because you think that by the end of their personal coaching you have become an expert but you are far away from that because most of that information is not useful.  Better invest your money by doing it small on your own, or by learning from other investors for free.