Funded Loan Buyers for Private Hard Money Lenders

Many private hard money mortgage lenders sell their loans (notes) on the secondary market, and the companies listed on this page are in the business of buying these funded loans which are secured by investment properties throughout the United States.

Lenders sell their loan in order to recapitalize so that they can originate and fund more loans. The lender (loan originator) has to fund the loan from their own balance sheet, and the loan parameters have to meet the loan buyers’ credit box. The buyer typically purchase the loans 1 to 3 weeks after closing.

Loan Buying Process:

• Lender closes loan using their own funds
• Lender sends complete loan file to Loan Buyer
• Loan Buyer completes due diligence on loan file
• Loan Buyer wires funds to Lender
• Note or Deed of Trust is assigned to Loan Buyer
• Lender maintains relationship with borrower throughout the loan term

Types of Private Mortgage Loan Buyers

The majority of companies that purchase private hard money loans on a forward flow basis are considered to be “institutional” companies. Institutional is a broad term, but it typically refers to companies that deal with the public money markets (Wall Street).

Private Mortgage Aggregators

Also known as “loan traders,” aggregators typically buy a large volume of private mortgages and then securitizes them into mortgage-backed securities, which are then sold in the public capital markets. Since 2016, there has been a huge appetite for private mortgage loans from these institutional capital providers. The majority of loans they purchase are rehab fix & flip loans, but they also purchase 30-year rental loans and ground-up construction loans.

Portfolio Loan Buyers

Some investment firms that buy funded loans will hold them (portfolio) and collect the interest payments throughout the loan term. These companies are likely a pooled mortgage fund. The money may come from accredited individual investors, private equity, or insurance companies.

The benefit of selling loans to a portfolio loan buyer versus an aggregator is the supply of capital is more stable. Whenever there is a major economic event that shakes the capital markets, aggregators may have to pause their loan buying until the markets stabilize. Portfolio loan buyers typically have committed capital which continues to work through tough market situations.

Qualifications

To work with the companies listed here, there are a few basic requirements:

• Have enough funds to close the entire loan
• Established loan originator with a strong track record
• Pass a background check
• Strong financials

Funded loan buyers offer an efficient source of capital for private hard money lenders. Lenders that get most of their loans funded by individual private investors face many challenges and inefficiencies. While it’s still good to maintain that investor network for some loans, an institutional or portfolio loan buyer can make a lender’s business much more streamlined.