To be honest with you, I never ran into the situation of needing money from a hard money lender for the loan portion only and maybe throwing the rehab portion on a credit card. I thought about it and asked a couple of banks if they would do a conventional loan but they (my local bank) wanted 20% down on an investment property and another bank would not do a loan below $50,000.
if you have good credit there is much cheaper money out there than HMLs.
For all of you that have been burned by CM and others…you have my deepest sympathies! As a “direct” Hard Money Lender, this sort of thing REALLY makes me mad!
I want to share a couple of observations, that are in no way meant to be contradictory in nature.
1.) There are only a few “Direct” HMLs in TX and other states. The rest are just trying to broker the loans to either other HMLs or private investors. What does this mean? It means if you are using a “Broker” HML you are putting your faith in someone that does not have the ability to close your loan if it meets the criteria.
2.) True “direct” HMLs do not ask for up front fees! Sure you have to pay for the Appraisal and Inspections up-front (either to the vendors or the lender) but this is done to ensure that those services are paid for even if you decide later not to go through with the loan.
3.) As my Grandfather used to say " A deal is worth almost as much as you paid for it". Sure you may find a broker promising lower rates or points, but if you lose the deal because they cannot deliver a loan…what have you really saved?
4.) HMLs are private lenders making “business loans” and therefore RESPA does not apply. Nor are they required to be licensed by the state to make loans.
[i]Although the RESPA definition of a federally related mortgage loan applies to loans secured by residential property, the law does contain a number of important exemptions. In fact, there are seven specific types of transactions that are exempt from RESPA. These exemptions from coverage include: business purpose loans, loans involving 25 acres or more, temporary financing, loans to purchase vacant land, assumptions, loan conversions, and secondary market transfers.
* Business Purpose Loans. After several changes, RESPA now exempts from coverage loans made primarily for business purposes. In the exemption, RESPA makes a cross reference to Regulation Z and its Commentary for guidance in determining the purpose of a loan. According to the Reg Z Commentary, issues to consider when trying to determine loan purpose include, among other things, the size of the transaction and the borrowers’ stated purpose for the loan. In most cases, this is fairly clear and you may rely on what the borrower tells you.
Temporary Financing. Another area of exemption involves loans for temporary financing. Although the term, “temporary financing” is not defined, RESPA states the term is intended to include construction loans, bridge loans, or swing loans. From this, RESPA also excludes certain types of financing from the exemption and considers these loans subject to RESPA.
For example, the temporary financing exemption does not apply to a loan made to finance construction of a one- to four-family residential property if the loan is used as, or may be converted to, permanent financing by the same lender. Second, the exemption does not apply if a lender issues a commitment for permanent financing, with or without conditions. And finally, any construction loan for a new or rehabilitated one- to four-family residential property is subject to RESPA if it has a term of two years or more.[/i]
This is important to know since you need to be very sure about your lender, as evidenced by the topic of this thread.
5.) If you know of an unscrupulous Lender or Broker…do just what you have done and run them out of the biz and warn your fellow REIs
Bottom line: a.) Ask folks that have gone before you who they recommend. b.) Be sure you are only dealing with HMLs who actually underwrite their loans themselves. c.) NEVER pay a consulting fee or other fee upfront (other than fees for inspectors and appraisers).
If you want to know who most of the direct HMLs in TX are let me know. I don’t know all of them but I do know most of my contemporaries.
Good luck…and in the paraphrased works of the Watch Commander from Hills Street Blues… “Let’s be careful out there”
Rob
Let me know if you hear of anything further. As of the last time that I checked the Dallas BBB, the site lists that the company has resolved the complaint issues. Funny, they didn’t resolve anything with me. I contacted them again and let them know that I was just a little ticked off to see this result posted on the BBB and that my complaint had definitely not been resolved. I re-filed and have yet to hear a response.
I just saw that this guy ripped someone else off recently for $1500 on another mesage board. I don’t see how this guy isn’t being shut down and arrested?