The great part about being in hard money lending is that we meet all kinds of highly talented people in the real estate and mortgage industry every single day. Many have carved out a specific niche market that they serve and they do it really well. It’s safe to say, that every day we are learning something new from a Realtor, loan officer, private money lender, or a borrower.
One of the other great perks of doing private money lending is that real estate can often be a business for dreamers looking to get rich quick. Many people have fallen prey to the gospel of late-night infomercial gurus and hit us with all kinds of silly loan scenarios that have “not a snowball’s chance in hell” of ever happening. Things like getting 100% financing for super-secret bank-owned properties that only the guru and his disciples have access to. And if they get one of these properties, could we get them 100% financing plus all the rehab costs?
Sorry, but there’s not a snowball’s chance in hell that is going to happen for an inexperienced real estate “investor” who just got out of a get rich quick real estate seminar.
But if there was a seminar that would guarantee unlimited access to mortgage capital at super-secret ultra-low rates only given to a select few divine beings, it would have been Tom Vu’s seminar where he taught attendees the three magic words to success:
1. Never 2. Give 3. Up
Those are the three magic words people used to pay thousands of dollars for.
Sorry to let you down even more, but Tom Vu stopped doing his seminars in the early 1990s so that window of opportunity has passed. No more super-secret ultra low unlimited mortgage funds for the chosen people.
The other group we get a lot of “not a snowball’s chance in hell” scenarios from are other mortgage brokers who, we’re guessing here, have probably made a career of throwing stuff against the wall to see what sticks. We had wrongfully assumed that the bursting of the first housing bubble would have forced them back to working at the cell phone kiosk at the mall. But low and behold, they’re still slinging loans.
So here are the top five “not a snowball’s chance in hell” loan scenarios from the past few weeks:
Q: I have a disabled veteran client in the middle of a Chapter 13 bankruptcy with 15 payments remaining. Do you have a lender who will give them 100% financing to buy a condo for $250,000?
A: Not a snowball’s chance in hell is this going to happen. If you’re in a Chapter 13 BK (the kind where you pay back a portion of your debt), you must ask the BK Trustee for permission to take on additional debt. It’s usually for an emergency, like where a petitioner’s car broke down and they need permission to get an auto loan to be able to drive to and from work. There’s almost 99.99% certainty that a Trustee will not allow a borrower in BK to take on an additional $250,000 of new debt before the old debt is paid off simply because they’re tired of renting and want to build equity in a home.
Q: I’m looking to invest in apartments but don’t have credit. Do you have 100% financing?
A: Sorry, but not a snowball’s chance in hell will this happen. Maybe if you found a very kind and patient apartment building owner who, out of the kindness of their heart, would show you the ropes and provide you with 100% seller financing. Then maybe you can get 100% financing. But good luck finding that unicorn. The last time we saw 100% apartment financing was 1989, at the height of Japan’s property bubble.
Q: The borrower told us, “I only need a 30% LTV first mortgage because I have seller financing for the other 70%.” And then the story switched to, “I have an ‘equity partner’ coming in with the other 70% to closing.”
A: On the surface, this appears to be pretty straightforward. My initial response was, “Wow, the seller is willing to carry back a 70% second trust deed. You don’t see that very often.”
When the “equity partner” for 70% came into the picture, I thought, “Gee, somebody must be good at putting deals together.” My intuition kept telling me something wasn’t right with this loan and that the deal would fall apart but I couldn’t put my finger on how it would happen.
When the close of escrow neared, I called to get escrow instructions and that’s when I found out that our loan for 30% was actually going to be the “equity partner,” going in second position behind the 70% first trust deed from another fund. The borrower had lined up two lenders thinking one of the lenders would just accept junior lienholder status.
Sorry, but not a snowball’s chance in hell will this happen.
Q: Another mortgage broker sent over a loan for his clients in Los Angeles who needed to refinance their existing private money loan on their primary residence that was coming due in a few months. Then the kicker, “My time is very valuable. I won’t work for less than 3 points commission.”
A: Ha! Not a snowball’s shot in hell, dude!
Owner-occupied private money loans have been relegated to the trash heap of the lending world after the new Dodd Frank regulations have forced the hand of lenders in this space. For the few owner-occupied loans that do close, mortgage broker commissions have been whittled down to around 1% to fit under the new APR limits.
So for our highly “valuable” referring mortgage broker to want 3 points commission on this loan is quite a laugher.
But that’s not the best part. His email signature line ended with “Your trusted advisor for life.” Of course, he was a trusted advisor for life! This kind of guy almost always has some silly tagline like that.
I wanted to print out the email thread with the trusted advisor for life and mail it to the borrowers to let them know how much he valued their business and their best interests.
Not a snowball’s chance in hell I would have actually pulled the trigger and mailed it. I talk a bigger game than I actually play!
Did I say five scenarios? I lied. This week we only bring you four “not a snowball’s chance in hell” scenarios.
For loan scenarios, silly or serious, please contact us.
We can give you the reality of any situation. Even if we don’t have a program for your scenario, we can point you in the direction of somebody in the industry who can help you or provide the information to help you make an informed decision.