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Hard Money: Beware of the Brokerage "Daisy Chain"

Principals or agents? What's the difference?

Private mortgage lenders are typically high net-worth individuals or pension funds. They are principals or people with money. Sometimes those principals delegate certain loan origination functions to loan brokers (who are agents). Some of the common functions we perform for our private mortgage investors are: due diligence, loan structuring, financial analysis of a borrower, valuation of the subject property, identifying an ability to repay the loan, and determining the credit-worthiness of a borrower.

How many agents in a private mortgage loan transaction are too many? I think that question can be answered by asking another question; what value does the agent bring to a transaction?

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Posted by Brian Brady- America's VA Home Loan Broker on 12/26/2006 02:46 AM

Comments (12)

hard money, san diego hard money, california hard money, multifamily loans, apartment loans, second mortgages

Originally posted at: America's #1 Mortgage Broker: Hard Money: Beware of the Brokerage "Daisy Chain"

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12 Comments on Hard Money: Beware of the Brokerage "Daisy Chain"

DEC

2006

Analagous to so many other industries....where you can save money by cutting out the, or a, middleman??

Good Morning Brian,

This sounds like commercial lending where everyone you talk to thinks they and their best friend are entitled to a point each.

2:46 am! When do you sleep?

Bill

William J Archambault Jr

The Real

Estate Investment Institute

http://www.reii.org

Brain, thank you for all these Posts on hard money, they are really making it easier for me to come to a better understanding of this part of the industry.

Kaushik: Middlemen are important and cost effective when the add value. Good insight.

Bill: Commercial lending is the epitome of this. We worked on a loan a few years ago for a chain of gas stations in Baja. The originator had 8 points in the deal. When questioned about the need for 8 points (on a $ 12 million deal), He explained that he had, ah...expenses. It turns out that he was greasing 3-4 sources along the way. Obviously, the ultimate investor wasn't going to finance 8% of the loan in fees. We offered the loan with two points; the loan never funded.

George: Glad you're enjoying them. I'll bet you are ready when one comes your way now.

This is excellent. I have a question to add, from a Realtor® perspective. When my client comes to me (or someone comes to me who winds up being a client) and they have already decided on a mortgage lender and they do not take the steps to shop around, that is their perrogative; sometimes the lenders in question are people I have not heard of. I check with lenders I respect, sometimes they still have not heard of them. Without making this War and Peace, are the above points questions I should be asking of lenders with whom I am not familiar? Or are there only certain types of deals where this would be true. In other words, if it's a conventional loan I can ASSume the lender is not really shopping the loan around to private investors? Sorry if this is basic but I sometimes think I need a list of ten questions to ask lenders that aren't the normal ones. Brian you can write that list for me on my new blog lolol

Hard money is rife with middlemen. It seems many hands are seeking few pockets. I have culitivated a few contacs of my own for this type of lending. I know what they have an appetite for and can find deals to meet their income need.

Excellent post.

John:

You should talk to George Souto. He's learning a bit about hard money and will one day need someone like you (or me). Your resources will be much more apt to fund loans in CT than mine. I'm glad you posted this. The originators who know hard money need each other to collaborate (as you know)

Moving on up eh?

Not up, Jon, just across. I'm glad Greg mentioned Active Rain in that post.

Brian i hope you had a great xmas with you and your family. The most a hard money lender tried to charge me was 4 points to do a loan through them.

Brian, thank you for posting this information. I am asked on occasion where to go for those hard to finance deals and I will direct them your way.

Brian, I know this is off topic to the main post, but going to your comment on commercial and fees charged... I am working a potentially large commercial transaction. The lender that I am considering placing the loan with works the way you do with the hard money. They set the fee and split it with the broker. I feel more comfortable doing business with a lender like this, then with one that says charge what you want and we will tack it on to our fee. There is no consideration given to the client in cases like this. Thanks again for the Hard Money posts. Hope you had a Happy Holiday.

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