All Forum Posts by: Corey Dutton

The financial technology sector has grown in leaps and bounds in recent years, churning out startups such as Square, the money transfer startup ‘TransferWise,’ and so many others. In the private money lending space, there are also new technology driven trends that are being tried, tested, and of course, copied by others at break neck speed. A couple of the most notable trends in private money lending include:

1.Crowdfunding: This is a new trend whereby money is raised from a large number of individuals via the internet to invest in projects, businesses, or other ventures. Most commonly associated with sites such as Indiegogo and Kickstarter, the crowdfunding concept has gained huge steam and many copycats have followed suit. This concept has inevitably leaked into residential and commercial lending. However, the legality of crowdfunding on residential real estate is questionable, given the new legislation under Dodd Frank and the Safe Act. Will these crowdfunding sites that lend on residential real estate be shut down due to non-compliance, or will they just operate under the radar? Either way, crowdfunding in real estate is a new trend that is yet to be fully tried and tested. Many companies posture as if they are doing it well and making money at it, but no one has yet seen the numbers so only time will show if crowd funding works in real estate or not.

2.Microlending: A concept that’s been around for awhile but is gaining steam as a new trend in lending is microlending. This is the giving of small loans from an individual or group to an impoverished person or business entity. Most commonly associated with the website ‘Kiva,’ microlending allows individuals and businesses to obtain credit in a geographic area where credit may not be readily available.

As technology continues to advance in the area of private money lending, more trends like these will grow and thrive. For those who have trouble obtaining loans, concepts like these will be welcomed with open arms.

Posted by Corey Curwick Dutton 

Making it easy for merchants to accept credit cards via their smartphones, Square has quickly grown to be one of the largest mobile payments providers. Amazon is rapidly following suit with its mobile payment solution called, “Amazon Local Register.” Positioning themselves against Square as a lower cost option, many insiders believe Amazon will soon topple Square to become the number one provider of mobile payments.

Square charges a whopping 2.75% per swipe transaction, while Amazon is offering an intro cost of 1.75%. This intro pricing offered by Amazon will bump up to 2.5% once the introductory period expires, but this is still cheaper than the service offered by Square. So just how will Square compete against Amazon in the mobile payments space?

Posted by Corey Curwick Dutton 

One of seven penalties imposed by the U.K.’s Financial Conduct Authority, Lloyds faces a $218 MM fine for misconduct and alleged manipulation of LIBOR. From a recent statement by Aitan Goelman of the CFTC, “Lloyds is being held accountable for serious misconduct,” by both U.S. and U.K. regulators.

Because mainstream media in the U.S. has largely ignored this scandal, many have scarcely heard of it. So what does this supposed, “misconduct,” mean for the financial markets as a whole? In the manipulation of benchmarks such as the interbank borrowing rate these banks were essentially messing with the cost of borrowing of upwards of $450 trillion in loans and derivatives worldwide. The LIBOR scandal, together with the fairly recent FOREX scandal, is a big wake up call to those that don’t believe in financial corruption, such as in the example of Lloyds Bank. As evidenced by the seven financial institutions that were fined in the LIBOR scandal, financial corruption is alive and well, despite increased oversight and fines by regulators.

Posted by Corey Curwick Dutton 

Most real estate investors choose hard money loans because they close quicker than bank loans. However, the biggest mistake real estate investors make is in the initial loan submissions to their lenders. By submitting inaccurate information about a property or loan request, a borrower slows down the loan approval and funding process.

As a hard money lender, we often receive loan requests from borrowers who are seeking to close their loans in a few days. Because this is such a short time to close on a loan, a hard money lender absolutely must have accurate loan submission information from a borrower. If a street address is missing a number, or the purchase price is stated incorrectly, this can cause a lot of headaches for the lender because it slows down the loan approval and funding process.

A recent example was a trustee sale in which we were contacted by the borrower who purchased the property yesterday and wanted to close today. The borrower submitted the loan request yesterday with the incorrect property address and an incorrect purchase price. We began to underwrite the loan today for immediate approval. We pulled up the property address provided in the loan submission and ran comparables for value based on the purchase price we were given. We thought the purchase price was extremely low for the neighborhood, but we issued a loan approval. Upon receiving the loan approval, the borrower contacted us to say the property address was incorrect and the purchase price was also not correct. After comparing the loan submission that the borrower initially gave us with the loan approval form, the borrower quickly discovered that he had submitted the loan information to us incorrectly.

By submitting inaccurate loan information to a hard money lender in your loan submission, you can quickly cost yourself a lot of time and money. If you want to close a hard money loan fast, submit the loan information with accuracy!

Posted by Corey Curwick Dutton 

I would also add to this list, inadequate financing for purchase, rehab, carrying costs, and any incidentals. Being under funded is also one of the biggest mistakes I've seen new rehabbers make.

You've taken the crash course on real estate investing and now you’re convinced you can make millions in real estate. You've contacted an agent to get started finding properties and you are ready to go. But what are the three most common mistakes made by new real estate rehabbers?

1.Going at it alone: The most successful real estate rehabbers use a mentor to help them find and evaluate deals. Once you find a seemingly good deal, a real estate mentor is crucial in helping you make the deal a good deal. If you skip this step of using a mentor, this is probably a mistake.

2.Using only one realtor: Don’t sign a contract with a single realtor right away. Talk to multiple agents and tell them your unique goals. Test each of these agents out before signing a contract. One of the most common mistakes is locking in with only one agent that never sends you quality deals to look at.

3.First rehab is a gut rehab: Never take on a gut rehab on your first few deals. There is a big difference between a cosmetic rehab and a gut rehab. Until you are experienced doing several cosmetic rehabs first, don’t make the mistake of taking on a gut rehab.

These are just a few of the most common mistakes made by new real estate rehabbers. What else would you add to the list?

Posted by Corey Curwick Dutton 

Mortgage fraud conspirators who contributed to the real estate crisis of 2008 are still standing in line for punishment. Six real estate and mortgage professionals in New York are facing charges that could put them away for up to 30 years. Alex Barrett, a mortgage broker, conspired with title agent Michelle Baker and several property managers to defraud lenders out of an estimated $5.5 MM in loans. U.S. Attorney Lynch commented, “Through a web of lies and false documentation, these real estate professionals allegedly stole millions from banks, which they used to line their own pockets.” Hopefully the long line of mortgage fraud conspirators who contributed to the real estate meltdown will all see their day in court and set examples for others.

Source: MPAMag.com: http://www.mpamag.com/mortgage-originator/six-charged-in-5-5-million-scam-18815.aspx

Posted by Corey Curwick Dutton 

James Donahoo II, of St. George, Utah, faces a proposed 48 month prison term for luring investors into his business of making hard money loans. Through his company called Paradigm Investing, Inc., Donahoo allegedly promised investors a 1-3% yield paid monthly from hard money bridge loans made to small businesses. Instead of making loans to legitimate small businesses with his investor’s funds, Donahoo allegedly disbursed the funds to businesses being used as puppets by his close associates, relatives, and friends. The defendant even elaborated fake bank statements for his company Paradigm, claiming that, “for every dollar invested, he had a dollar in the bank.”

Other horrifying stories have come to the surface of Donahoo’s excess with investors funds, including a shopping spree in Park City, Utah with $10,000 being spent on fur coats.

If you are thinking of doing trust deed lending or other loans with an individual or company such as this, think again. Confirm that the businesses or real estate that is being loaned on has legitimacy by using third party methods to verify. Never rely on the word of a company “representatives” to tell it’s story and the story of it’s investments.

Source: http://www.stgeorgeutah.com/news/archive/2014/06/17/st-george-man-pleads-guilty-2-5-mil-losses-victims/#.U7rBH41dVT4

Posted by Corey Curwick Dutton 

California real estate agent, Aldo Joseph Baccala of Petaluma, offered 12% yields to investors in a real estate ponzi scheme stretching out over 20 years. Promising returns from actual real estate investments, Baccala instead invested the funds in the stock market. Some of the real estate investments Baccala advertised to his investors included assisted living property purchases, farms, loans to mobile home buyers, etc. However none of these real estate investment opportunities were ever made. When Baccala sent out a letter to investors stating that payments would cease, authorities finally uncovered the 20 year ponzi scheme. Baccala defrauded over 50 family members and friends out of between $15 MM to $20 MM. Baccala was sentenced to 8 years in prison for his crime.

“The scale and scope of this man’s fraud on unsuspecting investors is staggering,” said District Attorney Jill Ravitchin. “That so many of his victims lost their livelihoods, their homes and their retirement savings, to this man’s scheming and greed is beyond tragic.”

Source: MPAMag.com: http://www.mpamag.com/real-estate/bay-area-real-estate-agent-sentenced-on-141count-ponzi-scheme-18722.aspx

In a recent article on American Banker, several financial technology startups were highlighted that are helping lenders in loan underwriting. One of these financial tech startups is called ‘Enigma.’ This technology allows underwriters to view publicly available data from 100,000 different sources. The availability of such data, facilitates much of the extensive research involved in loan underwriting. For example, a commercial real estate lender could examine water usage information, along with other utility usage of a commercial building, to better determine expenses and occupancy levels of the property.

Another startup that was highlighted in the article actually helps those with no credit history to obtain loans. RevolutionCredit is a service that banks and other lenders can request that borrowers sign up for if they have no credit history. RevolutionCredit offers online courses and tests consumer’s financial knowledge to satisfy lenders that potential borrowers are creditworthy. This eases lending decisions for loans to borrowers with no credit history. To see other startups in Financial Technology that are making waves, read the entire article on American Banker at this link: http://www.americanbanker.com/issues/179_126/six-fintech-startups-that-wowed-bankers-1068398-1.html

Posted by Corey Curwick Dutton