All Forum Posts by: Joffrey Long

Rick Harmon, K. Marie Poe, and Jeff S,

I'm primarily wholesale, meaning that 85% of my originations come from mortgage brokers bringing me the transaction for funding.

So I agree with Rick, on funding, K. Marie on reliability and understanding the deal, and with Jeff S. on timeliness, as well.

When you rely primarily on mortgage brokers to bring you the transaction, you really have to be reliable - they've got more options than anyone. (We do take originations from borrowers who don't have a mortgage broker, it's just that the mortgage brokers seem to find us the most.)

Thanks again, all. Great comments.

Joffrey Long

Jeff,

Thanks for your post. I'm not complaining - there's plenty of business out there.

On the contrary, I like being a hard money lender more now than before. The borrowers I'm loaning to, the properties I'm loaning on - all a lot better risk than who I loaned money to in 2006.

I agree, reliability is the issue. As I said in an earlier post, investor borrowers (and others) don't want to hear about what some private lender wants or doesn't want. They want the loan closed....now.

That's what we do.

Joffrey Long

To all:

Wow! Thank you all for the great comments. This is what I wanted and I think you've all provided a lot of great insight to all the BP readers......and best of all, not one "loan to own" comment. Thank you!!!

Brian Burke - I agree - some of the 12% guys/gals will never learn, and will try to "make up their loss on the next deal." They don't realize that if you collect a safer percentage, but really COLLECT it, you're ahead.

K. Marie Poe - Your feedback is always valuable, and you backed it up with an actual recent experience. This is very instructive to all. Congrats on getting what sounds like a good deal!

Rick Harmon - Great to hear from you again! Yes, get a niche, (or a few niches) that you gain a higher level of skill in. By the way, you mentioned FCI - do you know they will no longer do non-judicial foreclosures? That's HUGE!!!!

Bill G. - Yes. CFPB = Big trouble. That's why we have Edwin Chow, Western Regional Director of Examinations at CFPB coming to speak for us in February. I'm eager, no, anxious to hear what he has to say.

David C. - I'm not SURE Bill is right, that if a non-consumer loan, assumed by a consumer, could then involve CFPB. I'm inclined to think he is, but I much prefer your theory!

Gene Hacker - I think K. Marie was referencing the 9% as an investor, while you referenced it as a borrower. But that's a perfect example of a win-win in lending, and how costs / rates have come into a much more sane and acceptable neighborhood.

Joseph M. - Here's my take on your interesting observation: One - as far as LTV's going up, and hard money becoming more aggresive, that would definitely occur with continuing prices. BUT, and it's a HUGE but, in CALIFORNIA (which is all I know) the increasing difficulty in foreclosing on 1-4's may water down that improvement in the market. Also, we just got new investor discosure and suitability laws on 1/1/13 that add to the mix.
On banks competing with hard money lenders, I think it's a looooooong way until banks can do anything near what we can do.

Thanks again, all, for the wonderful feedback, and keep it comin!!!

Joffrey Long

Brian,

Thanks for your comments. (Like your website, by the way.) Agree with a lot of what you said, especially in paragraph 3, "guys that I talk to that hold out for 12%."

Actually, they can get 12%, as you pointed out, on a marginal deal or some speculative situation that will blow up in their face.

A mentor of mine said it so well, when referencing those types of "investors," (who really are just speculators) when he said, "Bernie Madoff taught investors that you can't get 12%."

I use that all the time when I meet the 12% guys. It doesn't convince them, but when their deal blows up, hopefully they'll recall those words.

On the bright side, there's plenty of us, who as hard money lenders, woke up a few years ago, smelled the coffee, and checked into the current reality.

Thanks, Brian - great post, in my opinion. And congratulations on doing well in Texas, also. I lost my _ _ _ there, back in the last century. Great that you're making it work!

Joffrey Long

Gene,

Thanks for the post! Great thoughts, and exactly the feedback I'm looking for. At our company, we're looking for the longer term, as our challenge is to keep our, and our investor's money invested, and our business model isn't based on getting rich by charging a lot of points on every deal. We try to price so people call us first with good deals, then if we don't do it, they go down the street.

Hey - I owe you a phone call. Haven't forgotten. Please shoot me the number again, if you don't mind. [email protected] I'll call tomorrow, if that's ok.

Here's my "take" on the market - and my question:

Will hard money continue to get cheaper? We see a continual pattern of huge amounts trust deed investment dollars chasing a smaller number of loans.

Rates in the single digits, costs near as low as what banks charged, and longer term loans. The old "Limbo Dance" comes to mind: "How low can you go?" (If you're too young to remember that, it's probably a good thing.)

Real Estate investors who bought when prices were much lower, (about 18 months ago here in Southern California) are selling/taking profits. Some of that money is chasing trust deed investments as well - driving rates and costs even lower.

Investment property buyers who can't or don't have 3 months to jump through the bank's hoops to try to get their loan are taking advantage of today's lower costs from hard money lenders. People using hard money loans for investment properties are sharp - we've got to have terms that make ssnse.

So my big question(s): Do you see an increase in any of the following? Hard money loans offered at single digit rates, longer terms and lower costs? Trust deed investments offered at lower yields? Or an increase in the use of hard money financing for investment purposes?

(I'm only talking about NON-OWNER occupied properties, not financing someone's residence.)

Look forward to your feedback!

Joffrey Long

P.S. When hearing the mention of "hard money," some feel compelled to mention "loan to own," where a lender merely loans with the hope of foreclosing. Wrong-O ! That's a pretty "1980's" business model - but especially dangerous with 2013's new investor and borrower protection laws.

69 is not old. 89 is getting there. You'll find out how young 69 seems when you're sailing toward 60. I'm careening!

I think I'll be out teetering around at 95, probably having some younger person drive me around, while I go to meet contractors to get estimates on new windows.

Addictions are addictions. That's why we appreciate property collectors anonymous.

This doesn't look like a gray area. I once again agree with Jon H.

I hate to use the "F" word, but it's fraud. The intent of the parties is to deceive the lender into honoring what they're led to believe is a legitimate lease.

The most likely place for this to unravel is if the delinquent owner later decides he/she does not like the deal they entered in to. That could happen if the rental works out well, value goes up, they get 2nd thoughts about having entered into the deal. They go to the defrauded lender, regulators, attorneys, and the witch hunt begins.

I compliment you on "throwing yourself to the lions" here at BP, where the damage to you is far less than if you actually did something like this.

Just keep in mind that deals where the profit is made at the expense of someone else (human or big corporation) who is deceived or deliberately made to believe in a set of circumstances other than those that actually exist........is fraud.

Joffrey Long

People get started doing deals here and there, maybe making loans, and they can run afoul of various laws, not only Federal, but their own state real estate and lending licensing laws.

Some don't realize that what they think is just investment activity of their own and of their "investors," is really something a regulator considers as requiring a license.

INVESTORS are a whole other wrinkle to this. Maybe I should cover that in another thread.

Hopefully everyone stays safe and legal out there.

Joffrey Long

Thanks, Bill.

To clarify, there are two laws referred to as "Section 32."

One is the "real" Section 32 of RESPA (Federal Law) and the other is California Financial Code 4970, which is referred to (but not officially named) "Cal 32."

Both create a threshhold, where if your apr or points and fees exceed certain limits, you (or your loan) becomes subject to higher standards and greater restrictions and liabililties.

Section 32 of RESPA kicks in on certain owner-occupied loans where the APR is more than 8% above the rate on comparable treasuries for first liens, and 10% above the rate on comparable treasuries for junior liens, when compared to treasury rates for the 15th of the month, in the month prior to when app was taken. It also kicks in when the points and fees exceed 8% of the "net loan amount." (Loan less points+fees)

California, not to be outdone, passed Financial Code 4970, where if your apr is more than 8% above comparable treasuries on either 1sts or junior liens, and the points and fees exceed 6% of the net loan amount, as defined above, you're covered, and subject to the more stringent requirements and limitations.

Anybody still awake?

Joffrey Long