Hard Money Loans - Conditions, Fees, and Terms for Brokers

Brokers and loan officers: Please do not call unless you've read and agree to the following terms of submission for hard money loans. Download PDF of this page.

General Considerations For Hard Money Loans

Our investors will consider any solid, "makes sense" private investment for a 1st, 2nd, or 3rd Trust Deed on real CA property, but will not consider the following:

1. "Pie-in-the-sky" development loans to investors or contractors based on stated future project values and/or estimated ROI, undocumented plans, non-approved blueprints and permits, and without pending or final approval by the appropriate state, county, or local agencies. No "speculative investor" loans.
2. Unentitled land loans. No loans against very rural or remote raw land, or land loan requests without a current and legitimate appraisal.
3. High LTV / CLTV loans, high-risk property, or some land loans without acceptable other REO that can be cross-collateralized as additional security.
4. Loan requests that demand immediate funding without the benefit of our investor's right to due diligence (see "Investor Rights" below).
5. Loans from brokers with excessive points charged or "broker chain" loans.
6. Loans against unseasoned property based on an excessively higher value or normal appreciation versus the original acquisition price without full and acceptable written documentation supporting both the reason for the low acquisition cost and an acceptable current appraisal or investor review appraisal. Many loans of this type are denied, but with enough supporting documentation these loans can sometimes be made under the right circumstances.
7. Undocumented construction or rehab loans, including a future value appraisal in-hand or forthcoming.

Minimum Hard Money Loan Amounts For Brokered Transactions

$100,000 minimum 1st Trust Deeds for all property types
$50,000 minimum 2nd or 3rd Trust Deeds for all property types
$250,000 for loans outside of CA -- NOO and commercial property only, no land loans

Maximum Broker Points

Total broker points paid for "covered loans" under CA AB489 law are limited to 1 point maximum. Other loans capped at our investors discretion and/or must be what we consider reasonable for the transaction and loan amount. "Points-only" paid-no separate fees for processing, admin, etc., allowed.

Broker Payment

Broker compensation paid from escrow at close. We provide demand for your payment in escrow to you according to the accepted, pre-negotiated fee to be paid at close. Payment is to broker only -- no payments to individual(s) per CA law. No "under-the-table" compensation paid.

Submission Guidelines

• Paperwork: A complete and signed 1003 application, current tri-merged scored credit report (or signed Signature Authorization with SSN), Dec Page of hazard insurance policy, and property profile are required for basic submission. Purchase loans require a signed copy of purchase contract. Do not inquire if your borrower refuses a credit report -- our investors do not care about the scores, but do care about potential future liens that can be levied against the property, such as back-owed taxes and judgments. This makes good sense and is within the right of any sensible private investor.
• Ownership & Vesting: For refinance loans, proof of borrower's identity is required via a copy of borrower's valid driver license. Property must be vested in same name as applicant(s), and co-owner(s) must be on the new loan or quitclaim deed off title.
• Documentation: New construction, finish loans, and rehab loans require documentation of accepted or pending approval, plans, permits, blueprints, and future value appraisal for consideration. Without this documentation, your borrower must own and agree to cross-collateralize other acceptable REO with sufficient equity and proper LTV to secure the loan -- no exceptions. OK to submit with a pending future value appraisal.
• Appraisal: Acceptable raw land, and/or land in rural areas require a current appraisal for consideration -- no exceptions. Not all private land loans in all areas are accepted, and cash out may be denied, limited and/or restricted to certain usage. A future value appraisal is required for all construction, finish, and rehab loans. An appraisal may also be required for other property types at our investor's discretion (see # 2 under "Investor Rights" below).
• Reciprocal GFE: Upon pre-approval of your loan, we will provide you with a Good Faith Estimate, and your borrower must provide us with a matching signed Good Faith Estimate from you that includes all fees relevant to the transaction prior to docs -- no exceptions. We reserve the right to confirm the acceptance and endorsement of the GFE by your client.
• Right of Acceptance: We reserve the right to refuse acceptance of loans that have been shopped extensively, do not meet our investor's criteria and Investor Rights (below), do not "make sense", or are not sufficiently documented to validate the loan sought. In addition, we will not accept loans from "broker chains", or from individuals acting "on behalf of" the real property owner without a legal and documented Power of Attorney.
• Zero Fraud Tolerance: Loan submissions found to be fraudulent in whole or in part will be reported to the proper authorities, including the CA DRE or CA DOC.

Acceptable Loan Types

Purchase, rate & term refinance, limited cash-out (not available on all property types), bridge lending, foreclosure and NOD payoffs, documented construction and rehab, blanket loans.

Acceptable Borrowers & Vestings

Individuals, foreign nationals, partnerships, trusts, LLCs, corporations

Acceptable Property Types

• CA properties preferred. Loans outside of CA for non-owner-occ and commercial property only. No non-CA land loans.
• SFR, condo, TH, mixed-use, commercial, retail, industrial, other
• Owner-occ, NOO, 2nd home, vacation home, investment property
• RAW LAND -- must be entitled and zoned residential, commercial, agricultural, or industrial. No unentitled land or "vacant misc" zoning. ALL raw land loans are case-by-case, and max LTV and cash-out is limited at investor's discretion when allowed.
• RURAL, REMOTE, or UNIQUE property (including land) is case-by-case, possibly with lower LTV and other conditions and restrictions, including cash-out restrictions and limitations at our investors' discretion.
• NO manufactured homes

Unacceptable Loans

• "Covered loans" on owner-occ residential property in violation of CA predatory lending laws (AB489) with regard to points, fees, and APR.
  http://www.dre.cahwnet.gov/predlaw.htm
• HIGH LTV / CLTV loans without acceptable cross-collateralized property UNDOCUMENTED construction and rehab loans without acceptable cross-collateralized property
• SPECULATIVE DEVELOPMENT or ACQUISITION deals, including JOINT VENTURES. If it isn't a project that has been planned, approved, and can be documented, including acceptable borrower / entity credentials, please do not inquire.
• BUSINESS loans. Loans must be secured by real property only. In some cases, lien-able or pledgeable assets, such as machinery, company vehicles, or other valuable equipment owned free and clear may additionally secure commercial hard money loans.
• Private "credit lines" for future purchases. Our investors do not "set aside" money for borrower's future use.
• Loans with excessive broker points or "broker chain" loans

Investor Rights

Our investors reserve the right to the following:

1. Due Diligence: Our investors exercise appropriate Due Diligence in consideration of a loan, regardless of your borrower's credentials and/or the merits of the property, and do so in whatever manner and time frame may be required to properly consider and administer the loan request. Translation: no guaranteed funding within any set time frame, period.
2. Value Determination: Our investor may request an appraisal of the property to verify fair market value by an appraiser of his choosing and credentials, or a review of an existing appraisal to determine fair market value. Further, to deny a loan based on an inflated appraisal, unrealistic stated value or super-appreciated value as compared to the acquisition price. An acceptable LOE, appraisal, and/or and other documentation may be required to support questionable acquisition cost versus stated or documented fair market value, particularly where reasonable comps cannot be documented.
3. Income Doc: It is illegal for any party to make a loan secured by real estate to any borrower who does not or cannot demonstrate the ability to repay the loan according to the terms of the Note. Our investor may request proof of the borrower's ability to repay the loan under the terms of the Note, and to deny an application for a loan whereby the applicant cannot reasonably demonstrate the ability to repay, if requested.
4. Additional Documentation: Our investors may request additional documentation of rents, income / operating expense, deferred maintenance, or other issues applicable to commercial, mixed-use properties, and land leased for rental income.
5. Determination of Marketability: Our investors may refuse a loan request for a property the investor considers being non-marketable or difficult to resell at a profit in the event of a foreclosure.
6. Right to Favorable Terms: Our investors may approve a loan based on a rate, LTV, CLTV, conditions, restrictions, terms, and fees favorable to the investor (and within state lending law and limitations), and not the applicant or broker.
7. Right to Limit Commissions Paid: Since it is the investor that pays points initially to the broker, it is within the investors right to limit how many points may be paid to the broker. We have an established fee policy -- see "Maximum Broker Fees".
8. Denial Based on Debt Service: Our investors may refuse to make a subordinate loan behind a very large or private existing 1st or 2nd Trust Deed (high-risk "debt service").
9. Right to Interest Reserve: Our investors may require or provide by request an "interest reserve" for a predetermined period of time at his/her discretion. Interest reserves are common for hard money construction and rehab loans, but may be required on other property and transactions as well.
10. Right to Prepayment Penalty: Our investors may require a prepayment penalty for a predetermined period of time, or to require additional interest or points for waiver of prepayment penalty.
11. Right to Cross-Collateralized Security: Our investors may require cross-collateralization of other acceptable REO at his/her discretion.
12. Right to Cancel: Our investor may cancel a loan if the applicant or broker cannot or do not produce required documentation or meet other conditions in a timely manner, or to cancel for any other reason, without written notification to broker or borrower.
13. Right of Assignment and Third Party Services: Our investors may assign a separate servicer and/or Trustee for the loan, use a specific title and/or escrow company, appraiser, or other third-party service provider for the transaction at his/her discretion.
14. Right to Borrower Access: Our investors may speak directly with your borrower about the loan if so desired. Likewise, our investor may refuse to be contacted by the borrower.

Call me to discuss your scenario or for submission instructions for your hard money loan. Do not fax, email, or expedite mail your package without calling me directly first.

John J. Harambasic
Trusted Mortgage Advisor
Augusta Financial Inc
(661) 255-9824