Hard Money lawsuits

As I’ve mentioned in several articles on our Hard Money Commercial Lending Resources Page, there are a number of items that brokers/borrowers need to be mindful of before engaging in a commercial lending transaction. The number one tip is: Be wary of large upfront fees. A recent article in the Wall Street Journal further highlighted this advice. The article titled: U.S., States probe real estate loan broker (www.wsj.com 6/25/08 p:A3) discusses how “the advance fee plan has cost borrowers millions”. This article highlights an all too common problem within the commercial lending arena.

Two firms are being probed by the FBI and SEC (Bluestone Capital and Remington Financial Group). The California department of corporations is also investigating Landbridge equity. These firms are accused of taking large upfront fees with the intention of “not seriously pursuing financing”. Unfortunately a substantial number of borrowers have likely lost millions as a result of the “advance fee” plan that these three companies have utilized.

How can you protect yourself from possible bad apples in the industry? First, do not provide any money upfront. Fairview never asks for money prior to issuing a loan commitment. Second, after receiving a commitment, ensure that it is real. Many brokers pose as lenders so it is essential to ensure that you are getting a commitment from a true lender, not from a broker just hoping to be able to get you the terms stated on the commitment. Third, once you are certain you have a real commitment, Google the lender to learn more about them and ensure that they are not one of the bad apples. Finally, as with any financial transaction, if a deal seems too good to be true it likely is. By following the tips above you can ensure that you are not a “victim” of the “advance-fee” game.

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