Hard Money Financing: Bridgelock Capital as a NextGEN Lender will continue to grow while others go under

Posted on May 1, 2008

May 1, 2008 Woodland Hills (YAHOO FINANCE) Hard Money Financing: Bridgelock Capital as a NextGEN Lender is slated for growth while other go under.

Let’s face it, the day of the 100% stated income, stated asset, no VOR, no trade-line, with 600 credit score is over. The pushback of bad loans made by non-prime lenders over the past two years has literally changed the fact of how we look at loans today. Credit qualifying, ability to repay and real underwriting of loans back to stay. So, where does a mortgage professional look to in order to continue originating loans in this environment?

With loan delinquencies and foreclosures at an all time high, the answer is easy, learn about and get into offering hard money loans. The first question you will ask is, “what is hard money”? Today’s hard money can be quite different than what was traditionally considered hard money three years ago. It used to be that access to true equity based, or hard money loans was only thru private investors at rates in the high teens and points of 8-10%. Today there are several companies that have truly institutionalized hard money. The touch and feel of these loans can be similarly related to that of the process of originated and funding a sub prime loan. But, don’t be fooled by the recent climate of institutionalized hard money lenders that do the same products (ie 228/327 ARMS).

It is very important to look at the difference between Private and Institutionalized Hard Money Lenders. A Private Lender has the ability to be flexible and creative, while the Institutionalized Lender fits all solutions into one product. It is very important to find a hybrid of the two. Below is a chart to show the advantages and disadvantages of both:

 

Brokers who wish to protect their future must build a solid relationship with this new hybrid hard-money lender that goes beyond the numbers and offers the financing needed to address the widening gap between alt A and sub-prime prospects.  It’s important to strategically align yourself with a hard money lender that offers a plethora of products, not just the mainstream products that are out there. Not all borrowers are equal and therefore it’s not prudent to only push one specific product for your borrower’s solution.

Don’t be fooled, a privately funded hard-money lender is not out to please Wall Street and can therefore be more responsive and creative to help brokers seeking financing for their clients.  These types of lenders offer not just one product, but will offer ARMS, HELOCS, short term bridge financing, to name a few. In other words, we’ll structure a product that will meet your clients’ needs each and every time. Hard-money lenders will do far more than the typical analysis of the numbers.  The best hard-money lenders understand the broker/client relationship and the need to provide a solution during the period of transition between sub-prime and alt A.

The combination of a good broker and a flexible creative, understanding, efficient, portfolio hard-money lender is exactly what you need to be successful in today’s market place.  This bi-directionl relationship allows the broker to provide additional value to the client by arranging the type of financing required to get the clients credit fixed and moving forward through the current financial hardship. By working with a hard-money lender, a broker can provide the right structure with the right product based on the client’s needs.  A good hard-money lender will typically follow these three main focus group approaches, outlined below.

The preeminent hard-money lenders are flexible, creative, understanding, efficient, and offer several solutions to the broker/client.  Such privately funded lenders are the solution for the growing need in non-traditional lending.  The three-tier approach to hard money lending outlined below goes beyond the numbers and provides the broker the best solution for creating clients for life.  Why create clients for life?  Doing so will guarantee your continued success by generating a recurring revenue stream.  There are three main focus areas when dealing with a hard money loan. Let’s take a look at the three main focus groups:

Focus 1: Valuation: LTA versus LTV

What method of valuation is your hard-money lender using?  Are they only considering Loan To Appraisal (LTA)?  Do they take the time to analyze the Loan To Value (LTV)?  This could have a significant effect on the viability of funding.  Many hard-money lenders may base the value of your clients’ real estate incorrectly, which will tremendously undervalue your clients’ equity.  Privately funded hard-money lenders analyze multiple scenarios that can positively effect valuation by as much as 20% to 35% as compared to other hard-money lenders.  Take the time to interview your hard-money lender to understand their criteria for valuation as well as their access to non-traditional solutions. 

Focus 2:  Service Debt (Client and Lender)

Client Servicing: A reputable privately funded hard-money lender will work with the broker and the client to confirm the affordability and suitability of the recommended programs.  Other hard-money lenders along with sub prime lenders often care more about the business of lending than the suitability of the proposed financing on your client.  When considering affordability and suitability, a reputable privately funded hard-money lender will work with the broker to avoid lawsuits resulting attributable to predatory lending practices.

Lender Servicing: Does your hard-money lender service their debt?  If so, this could be another plus for you to help your clients.  Hard-money lenders who service debt do not have to conform to conventional lending standards.  This allows them additional freedoms and flexibility in servicing your clients’ needs.  You want to be aligned with a privately funded hard-money lender that truly cares about what the broker and client want to accomplish. 

This will separate a “broker” who is merely looking for the next deal from a broker who knows the importance of creating a client for life.  When you take the time to find a privately funded hard-money lender, you will see that you have access to the many programs necessary to help your client transition through this financial minefield.

Focus 3: The Story

It is your responsibility as a broker to educate your privately funded hard-money lender.  You must know what is happening with the client and care about educating the lender to structure the right fit.  In the past, many lenders didn’t take the time or care to understand the story behind the funding.  What does the client need?  How long will the transition be?  What is the exit strategy?  What product will help them and meet their needs?  Many lenders only care about finding a way to get the client to fit into one of their product offerings and not what is necessarily best for the client.

In conclusion

In closing, you now have a feel for the importance of finding a hard-money lender that is a privately funded hard-money lender.  Here are some additional questions to assist you in selecting a lender that will be a great fit for both the broker as well as the client:

1.    Do you have multiple products that I can use with my clients to ensure that I can move them through a transition stage? 
If they have one product, they probably are not the hard-money lender for you.
2.    Can you cross collateralize multiple properties? 
If they have one product, they probably are not the hard-money lender for you.
3.    Please provide me a list of products offered.  If they can offer you 228 ARM, 327 ARM, No Fico and Fico, HELOC, Adjustable, Bridge Financing, etc. then they may be the lender that you are looking for.
4.    Does your lender have the ability to lend in more than one state? If they are only in one state, chances they are a smaller hard money lender.


This three main focus group approach offered by the best privately funded hard-money lenders will give you the tools to meet the needs of your client.  You will now have solutions to offer your clients for their individual needs and not be placed into a one-size-fits-all resolution.  This allows you as a broker to move to a higher level of service in the eyes of your clients’.  If you want to create a client for life, find the right partners to build bridges for your clients through their transitional financial period.