The Lending Crisis

As mentioned in my previous post, Hard Money lending is booming because Credit lending is in crisis. As a Frenchman, I am interested in financial news from France and Europe which allow me to have additional perspective on the Credit lending meltdown. For once we can be sure of one thing, we are facing a world wide crisis affecting banks from Europe to Asia. While the crisis offers numerous new opportunities to Hard Money lenders it also create some new challenges. Here I want to outline some of the issues that we are facing so that if you have to finance a loan through a Hard Money lender you will know what to expect.

1. Property values are declining and nobody know where and when it is going to stop. Since Equity is the only protection that Hard Money lenders have against default by borrowers, lenders are becoming very careful. In a down market equity protection can and may disappear. Until we start to see a stabilization of values be prepare to see lenders only finance the loans that are offering enough Equity protection. In addition, lenders will be very concervative in establising these values.


2. Appraisal license: We come across this regularly appraisers are doing appraisal that they are not licensed to do.


3. Clear Exit strategy is going to make a difference, because refinancing without an understanding of what is going happen leads to more foreclosures. As and example, if the property is going to be sold then get a listing agreement with the borrower.


4. Make sure the costs are reasonable. We should all be aware of the legal limits and ethicaly costs should be reasonable.


5. If there is a change on the title make sure that all the party involved understand what is going to happen. There is no secret, everything will be disclosed make sure that all is on the up and up.