Loan-to-Value Defined & Clarified

The maximum loan-to-value (LTV) is one of the most important guidelines to look for when seeking a private mortgage, especially when you want the highest possible leverage. It determines how much equity the borrower needs to have in order to qualify for the loan.

The confusion with the term sometimes comes from the lender advertising their max LTV, but if you’re the one seeking financing, it’s on you to be clear about the requested loan amount and loan-to-value. In many cases, the lender will ask you what the loan-to-value is, and the key to avoiding any confusion is to be specific. We recommend that you only use the term “loan-to-value” when referring to the as-is value. There are other terms that you can use to be specific for various deal types, including a purchase, junior lien, rehab, value-add, and ground-up construction. 

Property Purchase Loans

Let’s start with a purchase transaction. When you’re requesting a loan to acquire real estate that does not include any rehab or value-add, don’t even use the term loan-to-value. Be more specific by using the term “loan-to-purchase price” or LTP for short. Most lenders won’t care if you feel you’re purchasing below market value. They’ll consider the purchase price as the value. 

Property Rehab & Value-Add Loans

The deal type which causes the most confusion is a property rehab. Many real estate investors use the term loan-to-value when referring to the value after the rehab is complete. To avoid any confusion, use the term “loan-to-after-repair value” or LTARV for short. There are two other leverage ratios involved in rehab deals: loan-to-cost and loan-to-purchase price. The loan-to-cost, or LTC for short, is the amount of the rehab costs that the lender will fund. We already covered loan-to-purchase, but if the property has already been purchased prior to seeking a rehab loan, then use the term LTV to state the property’s as-is value.

In commercial real estate finance, rehab projects are commonly referred to as “value-add” deals, but the added value may not include any renovations. It could just be leasing some vacant spaces which increases the value of the property. If this applies to your deal, use the term “LTV after lease-up” to state the future value.

Ground-Up Construction Loans

Ground-up construction loans have a similar terminology to rehab loans, but instead of after-repair value, use the term “loan-to-completed value” or LTCV for short. The loan-to-purchase price is for the land acquisition and LTC is for the construction budget. Use the term loan-to-value only for the land value, if the land is already owned prior to seeking a construction loan.

Property Refinance Loans

The cleanest use of term loan-to-value is when the loan request is for a first mortgage refinance and there is no rehab or value add involved. It’s implied that your requested loan amount is based on the as-is value. If you’re seeking a second mortgage or third mortgage, use the term “combined” loan-to-value, or CLTV. It’s the amount of the first mortgage balance, plus the second mortgage amount requested, divided by the as-is value. You must include the first mortgage balance. Stating the LTV only with the junior lien amount would be useless to a lender. 

What is the Maximum LTV for Private Lending?

In private lending, the maximum leverage varies by lender and fluctuates based on market conditions, but in general, the majority of lenders max out at 70% loan-to-value. For a standard purchase or refinance, you typically need 30% equity. If your refinance includes any cash out, most lenders are more conservative and max out at 65% LTV. 

Maximum Leverage for Rehab Loans

85% LTP
100% LTC
70% LTARV

Maximum Leverage for Ground-up Construction Loans:

50% LTP
75% LTC
65% LTCV

Maximum LTV for DSCR Long-Term Rental Loans
For long-term rental loans, also known as DSCR loans, the max LTV is 75% and it may be lower depending on the DSCR (debt service coverage ratio). 

These are just average numbers. Some lenders are a bit more aggressive, and all lenders will become more conservative when there is uncertainty in the market. This video was produced in June 2022, at a time of major volatility in the private lending space caused by rising interest rates. Many lenders anticipate that property values will decrease through 2023, which means their maximum leverage will be a lot more conservative until the market stabilizes. 

How to Find Out the Maximum LTV for Private Lenders (AKA Hard Money Lenders)

If you use our platform to seek private financing, you’ll find that every lender has a very detailed profile which includes their maximum leverage for various deal types. Most lenders are pretty good about keeping this updated, so use us as a resource to figure out the maximum leverage as the market changes. Our platform offers 2 options to connect with lenders.

Option 1: Browse Lenders
Search on our site for direct lenders. All lenders have a very detailed profile with information about their lending guidelines, rates, fees and much more. You’ll see their maximum leverage close to the top of the Guidelines page. Make contact with each one directly. Send an email, call, or visit their websites.

Browse Lenders 

 

Option 2: Create a Loan Request
Fill out a questionnaire with information about your financing needs. You can then browse lenders and invite a few of them to view your deal. Or ask us for recommendations; we’ll review it and invite a few select lenders that we feel may be a good fit.

Get Started

 

Various Types of Bridge Loans Defined & Clarified


The challenge with the term “bridge loan” is it’s just too broad. In our industry, we have a similar dilemma with the terms “hard money loan” or “private money loan”. The confusion with the term “bridge loan” is more prevalent in the residential real estate space. In commercial real estate finance, it’s fairly easy to define. In fact, most of the private lending companies that focus on short-term financing only for commercial real estate are commonly known as bridge lenders. Whereas, in the residential investment sector of private mortgage lending, the terms “private lender” or “hard money lender” are more common. Regardless of whether the subject property is residential or commercial, there are several types of bridge loans, so you have to be specific when searching for lenders, and when you’re communicating your loan request to lenders.

Types of Bridge Loans

The most common bridge loan scenario is for an investment property purchase. No rehab or construction included, just a straight purchase. The investor has a cash down payment of twenty to fifty percent, the deal gets done fast, and they have a plan to refinance in less than 2 years. When referring to this type of deal, call it a Purchase Bridge Loan or an Acquisition Bridge Loan.

Commercial Real Estate Purchase with Renovation

If the plan is to renovate the property immediately after the purchase, and the loan needs to include funds for the renovation budget, the terminology you use is going to vary depending on whether the property is residential or commercial. In larger commercial real estate deals over one million dollars, lenders typically use the term “value-add” to describe loans that include a renovation budget. So you want to call this loan a “Value-Add Bridge Loan”. It’s very important to specify the value-add part, because a lot of commercial bridge lenders do not provide funds for a renovation.

Residential Investment Purchase with Renovation

If you’re seeking financing for a residential investment property deal that includes renovation, don’t even call it a bridge loan. Depending on the exit strategy, you can call it “Fix and Flip” or “Fix and Rent” or just simply “Purchase & Rehab” loan.

Similar situation for ground-up construction financing. Don’t call it a “bridge loan.” Just call it what it is and include the asset class to be more specific. For example, Multifamily ground-up construction loan, or SFR ground-up construction loan.

Adding even more confusion to this topic, many private lenders in the residential space now use the term “bridge loan” to categorize all of their short-term loan programs. So a purchase bridge, fix and flip, ground-up construction, are all categorized as bridge loans. The lenders doing this are ones that also offer long-term rental loans, and the terminology comes from the institutional secondary market which puts private mortgages into 2 different buckets – bridge loans and term loans. Another phrase used in the institutional capital markets is Residential Transition Loan, but you won’t really see lenders using this phrase when advertising to the public.

Property Exchange Bridge Loans

Another bridge loan scenario that’s totally different from the others I’ve mentioned thus far is commonly known as “buy before sell”. It’s essentially an exchange. You want to purchase a new property by using equity in a property that you plan to sell, but you have to buy before you sell. In commercial and investment property deals, this is sometimes called a reverse 1031 exchange. So if this is the type of deal you’re seeking financing for, use the term “1031 exchange bridge loan” when talking to lenders.

Owner-Occupied Home Exchange

If you’re seeking a bridge loan for an owner-occupied home, you want to call it a “primary residence bridge loan”. It’s very important that you mention the primary residence part, because the majority of private mortgage lenders will not lend on owner-occupied homes, and you don’t want to waste their time or yours. These are consumer-purpose mortgages which are highly regulated and not possible for private lenders to consider, except in California. The state law in California has an exception that allows private lenders to provide bridge loans to homeowners that are moving within the state. At this time, we don’t know any private lenders that offer primary residence bridge loans in any other state.

Refinance Bridge Loans

A bridge loan does not have to be for the purchase of a property. There are lots of refinance scenarios that need short-term financing. It could be a situation where the existing 1st mortgage is maturing, or the investor wants to cash out equity to use for another investment. The terminology for these scenarios is very simple. Just call it a “refinance bridge loan” or “equity cash out bridge loan”.

If you have to keep your 1st mortgage in place and want a 2nd mortgage cash out, call it a “2nd mortgage bridge loan.” There are quite a few lenders in California that consider 2nd mortgages, but the funds have to be used for a business or investment purpose. For most other states throughout the country, 2nd mortgages are extremely rare in private lending.

How to Find Bridge Loan Lenders

If you use our platform to find a lender, you’ll find that we currently use these broad terms to categorize lenders, and it’s not ideal. We do have plans to restructure and add categories for various bridge loan scenarios, but in the meantime, you’ll still find it to be a valuable resource when seeking a bridge loan.

If you’re seeking bridge loan here on PrivateLenderLink.com, you have 2 options:

Option 1: Browse Lenders
Search on our site for direct bridge loan lenders. All lenders have a very detailed profile with information about their lending guidelines, rates, fees and much more. Make contact with each out directly. Send an email, call, or visit their websites. First select a loan type, then enter the state or metro area where the property is located. A few loan types will show lenders that provide short-term bridge loans:

  • Private Money
  • Hard Money
  • Residential Bridge
  • Residential Fix & Flip
  • Residential Rehab & Rent
  • Residential Ground-Up Construction
  • Commercial Bridge
  • Commercial Property Value-Add
  • Commercial Ground-Up Construction

Browse Lenders 

 

Option 2: Create a Loan Request
Fill out a questionnaire with information about your financing needs. You can then browse lenders and invite a few of them to view your deal. Or ask us for recommendations; we’ll review it and invite a few select lenders that we feel may be a good fit.

Get Started

Canceling “Hard Money”

For as long as we’ve been in this industry, there has always been a terminology dilemma between the terms hard money and private money. Many real estate investors feel that a private money lender is an individual investor lending out their own retirement funds, but doesn’t charge any fees and typically offers 100% financing.

Those same real estate investors feel a hard money lender is a company that charges fees and higher interest rates than individuals, while being more conservative on the loan-to-value ratio. So the difference is really whether they’re borrowing from an individual versus a company.

Since the term hard money is more popular among the real estate investor community, many lending companies use it to describe themselves and include it in advertising to attract new business.

What’s wrong with the term hard money?

First, it just sounds rough and unprofessional. Aside from the real estate investors that use private lending for their investments, many people in the general public associate the term with lenders who take advantage of property owners by charging extremely high interest rates, exorbitant fees, hidden charges, and unethical business practices.

The reality is that the companies you may refer to as hard money lenders, are part of a very competitive, professional and regulated industry that plays a vital role to help real estate investors close more deals, which in turn improves neighborhoods throughout the United States.

Who is canceling hard money?

There are four trade associations which promote education and best practices among the private mortgage lender community.

  • California Mortgage Association (CMA)
  • Arizona Private Lender Association (APLA)
  • American Association of Private Lenders (AAPL)
  • National Private Lenders Association (NPLA)

California and Arizona have lots of mortgage regulations and require private loan originators to be licensed, so it makes sense that these 2 states have a trade association for private lending. The AAPL and the NPLA are the organizations spearheading the effort to cancel hard money. Both are trying to convince their members to stop calling themselves “hard money” lenders. In fact, the NPLA passed a resolution in March 2022 which encourages all those associated with Private Lending to cease using the term “hard money” and use alternative terms instead:

  • Private Lending
  • Bridge Lending
  • Transactional Funding

The largest players in our industry are members of these associations, and most are very supportive of this initiative.

Reasons for ending the use of “hard money”

There are two reasons for the effort to cancel the term hard money. The first reason is regulations. At both the state and federal level, the trade associations that fight the passing of new laws affecting our industry are finding that lawmakers are sensitive to the term “hard money” and associate it with lenders of last resort including, payday lenders, check advance, and pawn shops.

Private lending advocate constantly try to educate lawmakers of the evolution of our industry, how the majority of lenders in our space are professional and ethical. It doesn’t help the cause when many lenders continue to refer to themselves as hard money lenders.

The second reason for canceling hard money is capital markets. Private mortgage lending has historically been capitalized by individual private investors who provide the funds at closing, purchase the loans after funding, or invest in a mortgage fund. However, the majority of private mortgages in the United States today are made possible by institutional capital, which consists of hedge funds, private equity firms and other Wall Street-backed companies. Private mortgages now have a secondary market similar to consumer home loans, and this is the primary reason why private mortgage interest rates have decreased significantly over the past 7 years. Here’s how it works:

  1. Lender funds the loan using their own balance sheet
  2. Lender sells loan to an aggregator (AKA trader), allowing them to recapitalize and fund more loans
  3. The aggregators purchase hundreds of loans from multiple lenders to create a mixed pool of mortgage notes
  4. Pools are securitized and sold to the public capital markets or insurance companies

Some of the potential end buyers of the pools of loans are aware that the loans are commonly known as “hard money” and don’t want to be associated with it. The loan traders have their own set of terminology to describe private mortgages (business purpose loans, residential transitional loans, etc.), but having hard money floating around in our industry is causing some pain for them.

The origin of canceling “hard money”

The initiative to end hard money was started by John Beacham, the CEO of Toorak Capital Partners – one of the largest aggregators in our industry. Beacham first voiced his thoughts about canceling hard money at private lending conferences in 2021, and then eventually convinced the 2 national private lending trade associations to address it with their members.

Beacham was the author of the resolution “Encouraging the End of the Term Hard Money” which was passed by the National Private Lenders Association at the annual members meeting in March 2022. As a result, some of the largest private mortgage lenders in the country have already eliminated the term “hard money” from their websites and other marketing materials.

Obviously, it’s not possible to prevent lenders from using the term hard money. We know lots of lenders that embrace the term and don’t care about the challenges with regulators because they lend in a state that is very business-friendly. Other lenders don’t care about the challenges faced by aggregators because they don’t use institutional capital. However, the idea is that if the majority of professional private lending companies stop using the term “hard money,” it will become less popular over time. It could take several years before this happens.

Conclusion

So why does all this matter, and how does it affect property investors, brokers and others in the investment real estate space? The terminology disconnect could result in missed opportunities when you’re trying to connect with the right lender. The perfect example of this is when you search online for lenders. A search for “hard money” may eliminate a lot of good quality lenders that offer a similar loan solution as the lenders that show up in the search results but choose not to use the term hard money. You could search for “private lenders” instead, but both terms are quite broad and cover a variety of different loan types.

To solve this issue, we recommend searching by the loan type and the property’s state or metro area. Some private or hard money lenders only offer certain loan types, so it’s extremely important to include the deal type. Some examples are:

  • Purhcase Bridge
  • Refinance Bridge
  • Rehab
  • Fix and Flip
  • Ground-up Construction
  • Long-Term Rental (DSCR)
  • Value-Add

The state or metro area is equally important since many lenders focus on select regions. Adding the property type could also be helpful since some lenders only focus on commercial real estate versus residential investment properties.

 

California Foreclosure Process

Most of the information below was gathered from an interview we did with Randy Newman, President of Total Lender Solutions. They provide non-judicial foreclosure services in 5 states. Visit their profile on our Service Provider Directory to learn more about their services.

California is a Non-Judicial Foreclosure State

California is a non-judicial state, which means that the foreclosure is completed by an auction sale as opposed to a court proceeding. The lender must appoint a 3rd party, the trustee, to handle the foreclosure process.

The foreclosure process in California typically takes around 4 to 5 months, a minimum of 111 days from start to finish. It’s a 3-step process, starting off with a Notice of Default, then a Notice of Sale and ending with an auction sale. There is a 4th step after the auction sale for residential properties (1-4 units).

Step 1 – Record Notice of Default

Once the lender instructs the Trustee to file a Notice of Default (NOD), the trustee will contact a title company to record it in the county in which the subject property is located. Once recorded, the title company will send the Trustee a document called the Trustee Sale Guarantee (TSG). It contains information on which parties need to be notified of the NOD. The trustee will then send a notice to all parties listed on the TSG that a Notice of Default has been filed.

The Borrower will receive a notice by regular 1st class mail as well as Certified Mail. If there are multiple mortgages on the property, all lender will be notified of the NOD.

After the NOD is filed, there is a 90-day waiting period in which the Trustee does not take any action. During this time, the Borrower has the right to bring the loan current to reinstate it, so long as it’s a monetary default. They also have the right to pay off the entire loan balance. If at the end of the 3-month period, the Borrower has not paid off the loan or paid the past due payments (plus penalties), the Trustee will ask the Lender for permission to create the Notice of Sale.

Step 2 – Notice of Sale

Once the Lender grants permission to move forward with the Notice of Sale, The Trustee will determine the date, time and venue of the sale. This information must be recorded in the county clerk’s office, physically posted on the property, and published in a local newspaper once a week for 3 consecutive weeks. The week following the 3rd publication, a minimum of 20 days after the 1st publication, the sale may be conducted.

So long as the default is monetary, and the loan has not been accelerated, the Borrower still has the absolute right to bring the loan current during the 20-day period, up to 5 days before the scheduled sale date. Within the 5 days before the sale, the Borrower has the right to pay off the loan in full and cancel the sale.

Under California law, the Notice of Sale is valid for 1 year. So the Trustee may postpone the sale if requested by the Lender, for up to 1 year from the date of the original sale. If the sale does not occur within that 1-year period, the Trustee has to start the Notice of Sale process over from the beginning.

Here are a few reasons why the sale could be postponed beyond the 20-day publication period:

  • Lender works out a payment agreement with the Borrower
  • Litigation between the Borrower and the Lender
  • Borrower files for bankruptcy

Step 3 – Foreclosure Auction Sale

As with most foreclosure auctions, the property will be sold to the highest bidder who must come to the sale with a certified check to pay for the full bid amount. There is no deposit option.

The trustee will take the certified funds and issue the trustee’s deed within a few days. If the property reverts to the foreclosing lender, the trustee’s deed is sent to the lender the day of the sale.

Post-Auction Process for Residential Properties

In January 2021, California enacted a new law (SB1079) which applies to residential properties (1-4 units) that are sold at auction to real estate investors. The law created a post-sale auction where the property’s tenant or a non-profit organization or a person who plans to occupy the home as their primary residence can place a bid to purchase the home and cancel out the real estate investor’s winning bid. This adds another 45 days to the foreclosure process. We wrote a separate guide to explain how it works. Click the link below to read it.

Read the Post-Auction Guide


How to Find Foreclosure Service Providers

If you’re a lender seeking help with a foreclosure, use our website as a resource. Our Service Provider Directory has a list of companies that offer foreclosure services throughout the United States.

  1. Click Services in the main menu to access our Service Provider directory
  2. Click Lender Services
  3. Look for the Filters section, click Foreclosure
  4. View each company’s profile to learn about their program
  5. Click the green CONTACT button and reach out to the company directly

The companies listed pay us a monthly advertising fee, so there is no cost to make contact through our website. Please remind each company that you found them on PrivateLenderLink.com.

Visit the Service Provider Directory

California Foreclosure Post-Auction Process (SB 1079)

Most of the information below was gathered from an interview we did with Randy Newman, President of Total Lender Solutions. They provide non-judicial foreclosure services in 5 states. Visit their profile on our Service Provider Directory to learn more about their services.

This guide only covers the post-auction process for California foreclosures. We have a separate guide with information about the first part of the foreclosure process.

Read the Main Foreclosure Process Guide

What is SB 1079?

SB 1079 is a California law which upended the foreclosure process for residential properties. Its purpose is to offer more housing opportunities for homeowners and less opportunities for property investors (or large investment firms) that have typically had the upper hand with purchasing properties at foreclosure auctions in California. Under SB 1079, a foreclosure on a residential property in California has a post-auction process in which a potential owner-occupant buyer can place a bid after an investor has won the auction sale. SB1079 was passed in September 2020 and took effect in January 2021.

Example Scenario of Post-Auction Process

  • Lender and Trustee complete the standard foreclosure process, typically 4 months
  • Real Estate Investor wins the property with the highest bid at the auction
  • Potential Owner-Occupants submit bids higher than the Investor’s bid
  • Highest Owner-Occupant bidder gets the property

Eligible Bidders for Post-Auction

After the auction sale, any of the following types of bidders can out-bid a real estate investor:

  • Tenant occupying the subject property
  • Persons purchasing the property to make it their primary residence
  • Non-Profit Organizations that promote affordable housing
  • California state government entities

Applicable Property Types

The post-auction process only applies to residential properties:

  • Single Family Residence
  • Condominium
  • Townhome
  • Duplex (2 units)
  • Triplex (3 units)
  • Fourplex (4 units)

Land and commercial properties are exempt.

The Post-Auction Process

Here is the process created by SB 1079, after the auction sale:

  • Within 15 days of the auction sale, Eligible Bidders must submit to the Trustee a non-binding Notice of Intent to Bid
    • If no notices are received, the Trustee transfers the deed to the auction’s winning bidder on Day 16.
  • After the 15-day period, Eligible Bidders have 30 days to submit an actual bid along with a cashiers check for the full bid amount
    • Trustee will issue the deed to the highest Bidder

Tenants Have Priority
The tenants occupying the subject property only have to bid the auction’s winning bid amount, and they would get the property. All others have to be at least $0.01 over the auction’s winning bid amount. Tenants’ bids supersede bids by non-profit organizations, government entities, and persons who plan to occupy the property.

Conclusion

The California foreclosure post-auction created under SB1079 essentially clouds the transfer of title to the winning bidder from the auction sale, typically a real estate investor. The investor’s funds are tied up for a period of up to 45 days and may not end up getting the property. Investors would just have to hope that any eligible bidder doesn’t have the funds to purchase the property or doesn’t have any interest in the property.

The risk of having money tied up for that long will likely deter a lot of investors from bidding at the foreclosure auction, and perhaps this is the California lawmakers’ goal.


How to Find Foreclosure Service Providers

If you’re a lender seeking help with a foreclosure, use our website as a resource. Our Service Provider Directory has a list of companies that offer foreclosure services throughout the United States.

  1. Click Services in the main menu to access our Service Provider directory
  2. Click Lender Services
  3. Look for the Filters section, click Foreclosure
  4. View each company’s profile to learn about their program
  5. Click the green CONTACT button and reach out to the company directly

The companies listed pay us a monthly advertising fee, so there is no cost to make contact through our website. Please remind each company that you found them on PrivateLenderLink.com.

Visit the Service Provider Directory

Private Lending Events & Conferences

Private Lending Events Calendar 2022

February 7-8, 2022
National Lending Experts
Hilton Scottsdale Resort & Villas, Scottsdale, AZ

March 26-28, 2022
54th National Private Lending Event by Pitbull Conference
Ritz-Carlton Key Biscayne, Miami, FL

March 30 – April 1, 2022
California Mortgage Association Spring Seminar
Hyatt Regency, Newport Beach, CA

April 11-12, 2022
Innovate by Geraci Conferences
Balboa Bay Resort, Newport Beach, CA

June 16, 2022
Private Lender Expo
Hilton Hasbrouck Heights, Hasbrouck, NJ

June 21-22, 2022
Leverage Dallas by National Lending Experts
Marriott Downtown Dallas, TX

July 27-29, 2022
California Mortgage Association Summer Seminar
Mission Bay Resort, San Diego, CA

July 30 – August 1, 2022
55th National Private Lending Event by Pitbull Conference
Lowes, Miami Beach, FL

August 21-23, 2022
Captivate by Geraci Conferences
Encore at Wynn, Las Vegas, NV

October 19-21, 2022
American Association of Private Lenders 13th Annual Conference
Caesars Palace, Las Vegas, NV

October 26-28, 2022
California Mortgage Association Fall Seminar
Aria Resort & Casino, Las Vegas, NV

November 6-8, 2022
56th National Private Lending Event by Pitbull Conference
Venetian Resort, Las Vegas, NV

November 16-17, 2022
Leverage Tampa by National Lending Experts
Westshore Grand Hotel, Tampa, FL

December 8, 2022
Private Lender Expo
Caesars Palace, Atlantic City, NJ

Click the links to visit the website for each event. When you register or contact the event organizers, please tell them you learned about the event on PrivateLenderLink.com.


Private Lending Event Organizers

There are 6 companies that organize and host private lending conferences:

  1. Pitbull Conference
  2. American Association of Private Lenders
  3. Geraci Conferences
  4. California Mortgage Association
  5. Private Lender Expo
  6. National Lending Experts. 

Pitbull Conference

The Pitbull Conference has been running for over 20 years and has the largest audience in our industry. Although the name may give an impression of being an intimidating or aggressive environment, we can assure you that the only thing they are aggressive about is their marketing, which is very impressive. The Pitbull Conferences are extremely professional, and they attract most of the biggest players in our industry. They take place in exclusive luxury resorts 2 or 3 times a year. Miami has been the venue for their Spring conference from 2018 to 2021. The Fall conference took place in Austin in 2020 and 2021. We have attended most of their events since 2018 and don’t plan to miss any of them moving forward.

In 2019, the CEO of Pitbull Conference founded the National Private Lenders Association (NPLA). While the association does not have its own separate conference, there is an NPLA golf tournament, dinner, member meeting and a cocktail party the day before the Pitbull Conference. So the conference is typically on a Monday or Tuesday, and there’s always a big cocktail party the night before, but if you attend the NPLA events as well, it would end up being a total of 3 days. 

American Association of Private Lenders

Next up is the American Association of Private Lenders, also known as “AAPL” and some people call it “apple.” This organization was established in 2010 and has always hosted just one annual conference in the Fall, always at Caesars Palace in Las Vegas. This is one of our favorite conferences. It was the very first private lending conference we ever attended, back in 2013, and he has not missed any since then. AAPL’s conference date has always been close to Veterans Day in November, but in 2022 it will be in late October. The AAPL conference is always a two and a half day event. Day 1 has education all day, which is optional, plus a welcome reception at night. Day 2 is a full day, and Day 3 typically ends around noon. 

Geraci Conferences

The AAPL was founded by Anthony Geraci of Geraci LLP, a law firm in Southern California. Geraci maintains a minority ownership stake in the association, and his firm is still the general counsel for the association, but he created a media division and began hosting their own conferences around 2017. Being one of the largest law firms serving the private lending industry, Geraci LLP has a huge rolodex of clients who frequent their events. Their conferences draw some unique guests and speakers who don’t typically attend other industry events. They currently host 2 conferences per year which we feel are quite amazing. Innovate is a one-day event in the Spring in Southern California, and Captivate is a one and a half day conference which takes place in Las Vegas in either late August or early September. Both have epic cocktail parties the night before the conference. Geraci uses the Brella app which helps attendees match with the right people and schedule 15-minute meetings at a designated area in the exhibit hall. The entire Geraci staff, including the attorneys, is a fun group of people with a very positive vibe. We have attended most of the Geraci Conferences since early 2018.

California Mortgage Association

The next event organizer on the list is the only one out of the six that has a regional focus (the others are national events). The California Mortgage Association, commonly known as “CMA”, was established in 1999, and is focused on providing education and advocacy to private mortgage lenders. Since California has many mortgage and real estate regulations, their events are typically filled with educational sessions and therefore have been called “seminars” even though they offer a lot of networking as well. Pre-COVID, they hosted four conferences per year – two in Southern California, one in Northern California, and one in Las Vegas. In 2022, they are hosting 3 live conferences and may have some regional events in between. The schedule for these events have been fairly consistent – two full days on Thursday and Friday, plus a welcome reception on Wednesday night. We have attended most of the CMA seminars since 2017.

Private Lender Expo

The Private Lender Expo is the only industry event which we have not attended as of early 2022. A few people in the industry have shared with us some positive feedback about their last 2 conferences. These events are typically held in New York, New Jersey, or Miami. When they started a few years ago, their events only lasted a few hours. The last two have been one full day. In 2022, both of their conferences will take place in New Jersey – one in June, and another in December. We are planning to attend both of them and hope to be regular at their events in the future. One other thing to note is Private Lender Expo is the only private lending conference that does not currently charge a registration fee to attendees. The other conferences cost anywhere from $500 to $1,200 to attend.

National Lending Experts

The last event organizer on the list, National Lending Experts (NLE), is fairly new. They started out in 2021 with three conferences. All of them were one full day with a sponsored cocktail party the night before. The first was in Scottsdale in February 2021. In May, it was in Dallas, and September was San Diego. NLE went back to Scottsdale in February 2022 and had a golf tournament the day before the conference, hosted & organized by 2 sponsors. We attended the last three NLE’s, and all were solid events. NLE always gets some big name speakers for their panels, and we’ve heard positive feedback from other attendees about the sessions and content. They also attract people that we don’t see at other industry conferences. NLE uses the Brella app which helps attendees match with the right people and schedule 15-minute meetings at a designated area in the exhibit hall.

 

Just to clarify, none of the event organizers have paid to be mentioned here, and they don’t give us a free ticket to attend or sponsor their events. We feel they offer an extremely valuable service which is vital to our business and everyone in the private lending industry, so we are glad to support them by spreading the word about their events. And selfishly, more people attending these events means more potential networking opportunities for us. Another thing to disclose is we are a member of all 3 trade associations mentioned in this video – NPLA, AAPL, and CMA. 

There are lots of other conferences focused on additional sectors of the real estate industry which we have attended and keep on our radar every year, including ones for residential property investing, commercial real estate, alternative investments, note investing, and business finance. We’ll produce more videos and guides to cover all of these sectors in the near future. In the meantime, reach out to us if you’d like insights on any particular conference or trade association. 

 

Nevada Foreclosure Process

Most of the information below was gathered from an interview we did with Randy Newman, President of Total Lender Solutions. They provide non-judicial foreclosure services in 5 states. Visit their profile on our Service Provider Directory to learn more about their services.

Nevada is a Non-Judicial Foreclosure State

Nevada is a non-judicial state, which means that the foreclosure is completed by an auction sale as opposed to a court proceeding. The lender must appoint a 3rd party, the trustee, to handle the foreclosure process.

The foreclosure process in Nevada could take as little as 120 days from start to finish. It’s a 3 step process, starting off with a Notice of Default, Notice of Sale and ending with an auction.

Foreclosure Process for Business-Purpose Mortgages

Step 1 – Record Notice of Default

After the trustee records a Notice of Default (NOD), there is a 3-month waiting period. All parties involved will receive a copy of the notice by certified mail. The Borrower has 35 days to bring the loan current. After that 35-day period, the loan must be paid in full.

Step 2 – Notice of Sale

After the 3-month period, the trustee asks the lender for permission to send a Notice of Sale. The Notice includes the time, date, place of the sale, and the amount owed. The Notice is published in a local news publication, posted on the property, and mailed to all parties involved, including the IRS if there are any tax liens on the property.

Step 3 – Foreclosure Auction Sale

As with most foreclosure auctions, the property will be sold to the highest bidder who must come to the sale with all the funds to pay for the full price. There is no deposit. The trustee will take the certified funds, and several days later, will then issue the trustee’s deed, and the successful bidder becomes the owner of the property.

If the property reverts to the foreclosing lender, the trustee’s deed is sent to the lender the day of the sale.

Unique Foreclosure Process for Consumer Mortgages

If the defaulted loan is a consumer mortgage, the process is slightly different. First, the borrower has until 5 days before the sale to bring the loan current and end the foreclosure process. They can also pay off the loan within 5 days before the sale to end the foreclosure.

the trustee sends out a mediation package along with the Notice of Default. This informs the borrower that they can go to meditation with the lender if they feel something can be worked out. The borrower must submit an application within the first 30 days of receiving the NOD. A mediator’s fee must be included with the application. The court will then notify the lender and trustee of the mediation. The lender also has to pay a portion of the mediator’s fee.

If the mediation fails, the court will inform the trustee, by sending a certificate of mediation clearance, that they can proceed with the Notice of Sale at the end of the 90-day waiting period. If the mediator feels the lender was not cooperative during the mediation, they can refuse to issue the certificate. The lender would then have to try to resolve this with the court, which could cause the process to go longer than the typical 4-month duration.

Under Nevada law, the foreclosure must be completed within 9 months. So if there are any circumstances which cause delays past 9 months from the NOD, the lender must restart the entire process from scratch.


How to Find Foreclosure Service Providers

If you’re a lender seeking help with a foreclosure, use our website as a resource. Our Service Provider Directory has a list of companies that offer foreclosure services throughout the United States.

  1. Click Services in the main menu to access our Service Provider directory
  2. Click Lender Services
  3. Look for the Filters section, click Foreclosure
  4. View each company’s profile to learn about their program
  5. Click the green CONTACT button and reach out to the company directly

The companies listed pay us a monthly advertising fee, so there is no cost to make contact through our website. Please remind each company that you found them on PrivateLenderLink.com.

Visit the Service Provider Directory

Origination Fees (Points) for Private & Hard Money Loans

What is an origination fee? 

The origination fee in a private mortgage (AKA hard money loan) transaction is a percentage of the loan amount which the lender charges just for originating the loan, which includes sourcing the deal, underwriting, processing, and all the other work involved in closing a loan. The origination fee is a profit for the lender, and without it, they would not be in business.

Origination Fee is Also Known As Points

Origination fees are more commonly known as “Points,” which is the term that most mortgage professionals use in conversations and advertising. The term “origination fee” is more formal and typically mentioned on the term sheet, loan documents, and settlement statement. You won’t hear a lender saying “We charge an origination fee of two point five percent of the loan amount.” Instead, they will likely say “we charge two and a half  points.”

Origination Fee is Also Known As Basis Points

In commercial real estate deals, a lot of lenders and brokers use the term “basis points” which is just a different way of stating the percentage. So an origination fee of two and a half points may be stated as “250 basis points” or “250 bips” for short.

What are the typical origination fees for private mortgages?

In general, the typical origination fee for private lending (hard money) ranges from 1 to 4 points, and it can vary based on a number of factors, including the loan amount, the loan type, property type, location, and the borrower’s financial situation.  The majority of lenders charge between 2 and 3 points.

You may find some lenders that charge 1 to 1.5 points, but this is not common. There are a few scenarios in which private lending companies may charge less than 2 points:

  • Large loan amount, over $2,000,000
  • Low Loan-to-Value
  • High volume property investor doing many loans with the same lender
  • Mortgage broker working with a lender that offers a wholesale pricing program

On the high side of the spectrum, you may find some lenders charging up to 4 points because of a low loan amount, or if the loan has a higher risk profile which many other lenders won’t consider. Some examples include:

  • Rehab loan with high leverage (95-100% financing)
  • Land Loans
  • 2nd Mortgage
  • Rural Location
  • Unique Property Type

If a lender doesn’t have a lot of competition for the type of loan you’re seeking, they may charge higher origination fees just because they can.

There may be some cases where a lender would charge up to 10 points on a loan, but that’s likely to be for loans under $50,000. There are not many private lending companies out there that will fund less than $50,000, but we do have a handful listed on our website. For residential investment properties, most of the lenders in our network have a minimum loan amount of $100,000.

Origination Fee / Points Charged by Mortgage Brokers

What if you’re working with a mortgage broker and not directly with the lender? Mortgage brokers also charge an origination fee. As with lenders, the broker’s fee may vary based on the loan amount, but in general, most mortgage brokers charge 1 or 2 points for private money and hard money loans.

The broker’s origination fee may also depend on how many points the lender is charging. If a lender charges 2 points, the broker will typically be limited to charging 1 or 2 points. In many cases, the broker may not be allowed to charge more points than the lender’s origination fee. It typically has to be less or the same. We’ve seen some lenders have the policy to cap the total number of points that a borrower would pay, and those lenders may be flexible with their points to make sure the broker also gets a fair compensation.

There are some cases where the broker charges points, and the lender doesn’t charge any points at all. You typically see this happen when the lender is a high net worth investor or a family office investment firm that does not participate in the origination process because they are not qualified to, or because they don’t have a license and are not permitted by state law to collect an origination fee.

How to Avoid Paying an Origination Fee

If you are adamant about not paying any points, you may be able to negotiate with the lender to eliminate the origination fee and charge a higher interest rate instead. For example, if a lender quotes 8% plus 2 points, you can ask for 11% and 0 points.

This would only make sense if you’re positive that the loan will be paid off in a short period of time, but it also has to make sense for the lender, and there would likely be a minimum interest guarantee. Only a  small percentage of private lending companies may consider this. Before you ask for this, run the numbers to confirm that it makes sense for your deal.

Origination Fee Structures

The lender charging the lowest number of points may not be the lowest-priced loan. There are many different ways in which lenders structure their deals, and there may be other fees charged in addition to points. Below is an example of 2 different origination fee structures.

Lender A
Loan Amount: $200,000

  • Origination Fee: 2 points
  • Underwriting Fee: $1,000
  • Processing Fee: $500
  • Loan Docs Fee: $500

Total Fees: $6,000

 

Lender B

Loan Amount: $200,000

    • Origination Fee: 3 points
  • Additional Fees: NONE

Total Fees: $6,000

In the example above, both lenders are charging the same amount of fees, but structured in a different way. Don’t write off a lender just because their points are higher than other lenders. You have to dig a little deeper and look at all the other fees the lender is charging.


How to Find Direct Private Mortgage Lenders

If you’re looking for a private lender to fund a specialty commercial property, use our website as a resource. There is no fee to search, and we have a filter you can use to find out which lenders consider specialty properties.

    1. Start at the Find a Lender page.
    2. Type in a state or major metro area, and click SEARCH.
    3. Look for the Points percentage range on each lender’s card in the search results.
    4. View each lender’s profile to learn about their guidelines, pricing and more. You’ll also find the Points range on the lenders’ profile, close to the top.
  1. Click the green CONTACT button and reach out to the lender directly.

The companies listed pay us a monthly advertising fee, so there is no cost to make contact through our website. Please remind each company that you found them on PrivateLenderLink.com.

Arizona Foreclosure Process

Most of the information below was gathered from an interview we did with Randy Newman, President of Total Lender Solutions. They provide non-judicial foreclosure services in 5 states. Visit their profile on our Service Provider Directory to learn more about their services.

Arizona is a Non-Judicial Foreclosure State

Arizona is a non-judicial state, which means that the foreclosure is completed by an auction sale as opposed to a court proceeding. The lender must appoint a 3rd party, the trustee, to handle the foreclosure process. 

The foreclosure process in Arizona could take as little as 92 days from start to finish. It’s a 2 step process, starting off with a Notice of Sale and ending with an auction.

Foreclosures in Arizona can only be initiated due to a monetary default – failure to make payments. A lender cannot start a foreclosure due to the condition of the property or other breaches of contract per the loan documents. However, if there is a non-monetary violation, the lender can accelerate the loan to demand that the entire loan balance be paid in full, prior to starting the foreclosure process.

1 – Loan Acceleration Notice

If the default is non-monetary, and the lender wishes to accelerate the loan, the lender, or the lender’s attorney, must send a written notice to the borrower informing them that the loan has been accelerated, including the reason why, and provide a timeframe in which to remedy the issue or pay off the loan in full. The timeframe is determined by the lender. It could be a few days or a few weeks.

2 – Notice of Sale

When ready to begin the foreclosure process, the Lender will instruct the Trustee to send a Notice of Sale to the Borrower by certified mail, and the notice is simultaneously recorded with the county clerk, electronically. 

The Notice of Sale will set the time, date, and venue for the sale. The date of sale has to be a minimum of 91 days from the date that notice is recorded.  In order to prevent the sale of the property, the Borrower has until the day before the scheduled sale to make the loan current, or pay it off in full. At 5 pm on the day before the sale, the Borrower’s rights are terminated. 

3 – Foreclosure Auction Sale

Arizona foreclosure auctions can be held on any weekday, except holidays. The starting bid must be published on the Trustee’s website at least 24 hours prior to the sale.   As with most foreclosure auctions, the property will be sold to the highest bidder. 

The buyer does not have to bring all the money to the auction. Only a deposit of $10,000 is required to be paid toward the successful bid. The buyer then has 1 business day to pay the balance. Once that payment is received, the Trustee will immediately issue the deed to the buyer, which completes the foreclosure process.

If the winning bidder does not pay the remaining balance due before 5:00 PM on the next business day, the $10,000 deposit is forfeited, then the next successful bidder would be notified and offered the property. If there are no additional bidders, the property could go to the lender, if they want it. If not, a new sale date is set. 


How to Find Foreclosure Service Providers

If you’re a lender seeking help with a foreclosure, use our website as a resource. Our Service Provider Directory has a list of companies that offer foreclosure services throughout the United States.

  1. Click Services in the main menu to access our Service Provider directory
  2. Click Lender Services
  3. Look for the Filters section, click Foreclosure
  4. View each company’s profile to learn about their program
  5. Click the green CONTACT button and reach out to the company directly

The companies listed pay us a monthly advertising fee, so there is no cost to make contact through our website. Please remind each company that you found them on PrivateLenderLink.com.

Visit the Service Provider Directory

California Usury Laws for Private Mortgage Lending

Most of the information below was gathered from an interview we did with Nema Daghbandan, Partner at Geraci Law Firm, while attending a California Mortgage Association conference in October 2021. Nema is an expert in compliance for private mortgage lenders throughout the United States. Visit Geraci’s profile on our Service Provider Directory to learn more about their services.

What is California’s Usury Law?

Article 15 of the California Constitution states that the maximum interest for a loan secured by real property is 10% per year. The 10% is an annual percentage rate (APR), which includes all the fees charged to the borrower, not just the interest rate. What’s really interesting about California’s usury law is that it only applies to unlicensed lenders. Any loan that is arranged by a lender or broker licensed by the State of California is exempt from usury.

Licensed Entities Exempt from Usury

There are two types of licenses for mortgage lending in California. If you fund or broker a private mortgage for a property in California under one of these two licenses, the loan is exempt from usury.

Real Estate Broker License
The California Real Estate Broker license is regulated by the California Department of Real Estate (DRE). It’s mostly used by lending companies that have the loans funded by private party individual investors. Private mortgage loans originated by lenders and brokers that have an active DRE license are exempt from usury in California.

California Finance Lender License
The California Finance Lender (CFL) license is regulated by the Department of Financial Protection & Innovation (DFPI). This is mostly used by private lending companies that lend from their balance sheet. Most mortgage fund managers use this license, as well as lenders that sell loans to the secondary market. Private mortgages funded by lenders that have an active CFL license are exempt from usury in California.

Some private lending companies have both a California DRE and CFL license.


Lending in California Without a License

Lenders and Individual Investors who don’t have an active California DRE or CFL license should consider working with a licensed broker to arrange/originate the loan in order to get their loan exempt from usury.

A non-licensed lender may arrange their own loan directly to a borrower for real property in California, but it would be subject to the state’s usury law. So the maximum annual percentage rate cannot exceed 10%. Also, an unlicensed lender may only arrange one private mortgage per calendar year. This is not part of the usury law, but this rule falls under another regulation and statute.

Usury Triggers for Note Investors 

Many private mortgages in California are arranged by a licensed broker/lender but funded by a note investor. Some are sold to a note investor after closing. These note investors, if not licensed, should be cautious about making any changes to the loan during the loan term, because the changes could trigger the usury law to take effect. Below are a few examples.

  • Provide the Borrower with additional funds, causing the loan amount to increase
  • Extending the loan and charging an extension fee
  • Renewing the loan

All of these events would cause the loan to be subject to usury. If a note investor decides to take any of these actions, they must make sure the total APR is less than 10%.


Find Private Mortgage Attorneys

If you’re a lender seeking legal assistance with a usury case in California or any other state, use our website as a resource. Our Service Provider Directory has a list of law firms that serve private money and hard money lenders throughout the United States.

  1. Click Services in the main menu to access our Service Provider directory
  2. Click Legal
  3. Look for the Filters section, click Compliance
  4. View each law firm’s profile to learn about their services
  5. Click the green CONTACT button and reach out to the company directly

The companies listed pay us a monthly advertising fee, so there is no cost to make contact through our website. Please remind each company that you found them on PrivateLenderLink.com.