First of all, what is hard money? Hard money is money borrowed from a private individual or small lending firm that lends out their own cash. Put differently, it’s borrowing money from a person rather than a bank, and is subject to that person’s whims, not the bank’s loan programs or rate sheets.

Practically speaking, this means that hard money loans are very expensive and very fast. Interest rates range between 12-20%, and points, or percentage charged up front as a closing cost, range between 2-8%. These loans are not for everyday home buyers, as you can probably appreciate.

The terms are usually very short, usually no more than a few years, and loan to value (LTV) ratios are extremely low. So, if a property is worth $130,000, a hard money lender may only lend $75,000.

So what’s the appeal of a hard money loan, with all of these drawbacks?

Hard money loans are FAST, for one thing. While the bank will usually take a month to close, a hard money lender can generally close in a week, sometimes less. So if you need money to buy a property quickly, for example from a distress sale, you might need a hard money lender in order to settle in time.

Aside from their speed, hard money loans are much easier on the borrower, since they require far less documentation and paperwork. The reason for this lies in the lender’s security: hard money lenders are lending against the collateral, not against the borrower. If you default, they know they’ll get their money back, because they’ve only lent out a small fraction of what the property is worth. So, borrowers with bad credit or income that’s hard to document might go to a hard money lender because they will be less discriminating about these factors.

So who should use hard money lenders?

Homeowners really have no business borrowing from hard money lenders, due to the high expense and short terms of the loans. Seasoned real estate investors, on the other hand, may decide that a hard money loan is worth the added expense, if they need to settle quickly and efficiently. Some investors may not have a choice, given their bad credit or un-provable income, and have to use hard money lenders because banks won’t talk to them.

Hard money loans are particularly conducive to renovation or construction loans, because they’re quick and flexible. When a developer or real estate investor has a tight timeline to finish the work on their investment property (which is always), they may not want to wait a week for the bank to get an appraiser out to the property, send the draw check through processing, etc. every time they need a draw, and opt for a hard money lender for a quick turnaround times. Landlords who buy shells to renovate and hold as rentals may choose hard money loans, since they’ll be refinancing as soon as the house is finished anyway.

Anyone considering real estate investing as a career should establish a relationship with at least one hard money lender and at least one small, local bank, as local banks can often provide similar loans as hard money lenders without the expense. There will come a time when you’ll need money fast, and there will be others with a cheaper loan through the bank will work fine, so be sure to have several types of lenders in your speed dial, and make sure they know who you are.

Read more articles for landlords and real estate investors at EZ Landlord Forms, along with free real estate forms and real estate investing tips and resources.

“A loan is nonperforming when payments of interest and principal are past due by 90 days or more, or at least 90 days of interest payments have been capitalized, refinanced or delayed by agreement, or payments are less than 90 days overdue, but there are other good reasons to doubt that payments will be made in full”

What is secured debt?

Debt backed or secured by collateral to reduce the risk associated with lending. An example would be a mortgage, your house is considered collateral towards the debt. If you default on repayment, the bank seizes your house, sells it and uses the proceeds to pay back the debt. Assets backing debt or a debt instrument are considered security, which means they can be claimed by the lender if default occurs. Obviously unsecured debt is higher risk, and as such lenders of unsecured money typically require a much higher return.

What is unsecured debt?

The concept of unsecured debt is easily understood when its opposite is considered. A good example of secured debt would be a mortgage. The bank loans out money to a lender who uses it to buy a house; the house becomes the asset backing the loan. In the case of unsecured debt, a lender loans money without the security that an underlying asset provides. For this reason, unsecured debt carries more risk for the lender, which in turn makes the loan more expensive. The more additional risk that a lender must take on, the higher the rate of interest a borrower must pay, making unsecured loans subject to higher rates.

So what does this mean to a lender who holds a non-performing secured note on an upside down home?

If a lender is holding a note on a home that’s worth less than the amount on the loan then a portion of that note is basically unsecured. If a lender is in a 2nd lien position on a secured loan and the loan defaults there must be enough equity to pay off the 2nd after the 1st is paid or the 2nd lien holder becomes an unsecured creditor.

If a home owner is behind on mortgage payments or in default and owes more than the property (secured debt) is worth then what makes the most sense to the lender?
One would think the lender would be encouraged to work out the loan or take back the property and write off the losses… Like they need more write-offs!

So why do we have such a high rate of foreclosures and the lenders work outs not working?

The answer is simple, lack of communication and the inability to properly negotiate through these non-performing loans. They are just trying to collect a debt and they’ they only know one way, a forbearance agreement the borrower can’t afford! So you have to ask yourself why can’t they just take the past due amount and put it on the end of the loan then have the borrower just continue to make the payments? There are several reasons why this is not practical. I mean really, these borrowers think they got screwed and many of them are right! The rates went up with the cost of living, the property values went down with most home owners income, and some got a double whammy trying to leverage their home with an Option ARM home loan or equity line.

So what’s the answer?

Loan modifications…If you want to negotiate with your lender then hire a pro. Hire an Attorney!

Having the knowledge and know how necessary to facilitate a successful resolution is what they do… While most individuals have the ability to negotiate face-to-face with another party, the terms of the deal must be properly memorialized in a contract in order for them to be legally binding. Attorneys can do that by not only negotiating on your behalf, but also making sure that the contract adheres to all state laws as well as addresses any specific issues that might affect the future use of the property while keeping their client’s best interest at heart.

For example, in New Jersey, the law stipulates that the buyer and the seller have three days to review a real estate contract signed in conjunction with a realtor before it becomes legally binding. Some home buyers/sellers aren’t aware of this. A lawyer will not only make the client aware of it, the attorney will also review the contract for any legal glitches, make any necessary changes to it, and insert any contingencies that you might have. In addition, if you have a subprime or option ARM loan the Attorney can threaten to rescind the loan if they find TILA or RESPA violations and use these violations as leverage in negotiating a loan modification on a secured debt.

Bottom line… If you’re in trouble, facing default or foreclosure you may need to hire an Attorney to handle the negotiation to save your home from foreclosure. A skilled Attorney may be able to negotiate your interest rate, principal balance and the terms of your loan. A “make sense” offer to the lender with supporting criteria showing them how bad it could be for them if they don’t modify the existing terms of your mortgage may be the best solution for both parties. The loan performs for the lender and the client keeps their home.

Anthony Dean has helped many home owners with the loan modification process. Find out how a Loan Modification could save your home.

Traditionally, banks and other lending institutions have distributed their own products. However as markets for mortgages have become more competitive, the role of the broker has become more popular. Today in most developed markets brokers are the largest distributors of mortgage products for lenders.

Banks’ activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to High Net Worth Individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profits. Central banks are normally government owned banks, often charged with quasi-regulatory responsibilities, e.g. supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as Lender of last resort in event of a crisis.

The nature and scope of a broker’s activities varies with jurisdiction. For example in the UK anyone offering brokerage is offering a regulated financial activity; the broker is responsible for ensuring the advice is appropriate for the borrowers’ circumstances and is held financially liable if the advice is later shown to be defective. In other jurisdictions the transaction undertaken by the broker may be limited to pointing the borrower in the direction of an appropriate lender and no advice given.

Therefore the work undertaken by the broker will depend on the depth of their service and liabilities. Typically the following tasks are undertaken:

Marketing to attract clients

Assessment of the borrowers circumstances (Mortgage fact find forms interview). This may include assessment of credit history (normally obtained via a credit report) and affordability (verified by income documentation).

Assessing the market to find a mortgage product that fits the clients needs. (Mortgage presentation/recommendations)

Applying for a lenders agreement in principle

Gathering all needed documents (paystubs/payslips, bank statements, etc.)

Completing a lender application form.

Explaining the legal disclosures.

Submitting all material to the lender.

A broker works as a conduit between the buyer and the lender, the loan officer typically works directly for the lender. Most states require the broker to be licensed. States regulate lending practice and licensing, but the rules vary. Most have a license for those who wish to be a “Broker Associate”, a “Brokerage Business”, and a “Direct Lender”.

A broker is normally registered with the state, and personally liable (punishable by revocation or prison) for fraud for the life of a loan. A loan officer works under the umbrella license of their current institution. Both positions have legal, moral, and professional responsibilities as well as liabilities to prevent fraud and fully disclose loan terms to both consumer and lender.

Typically, a broker will make more money per loan than a loan officer, but a loan officer can utilize the referral network available from the lending institution to sell more loans. There are mortgage brokers and loan officers at all levels of experience.

Mortgage Lenders in Canada.

Speak to Mortgage Brokers in your area.

Enough of the tangent, though. I just wanted to tell you not to be afraid to do more than required for this business model. With that said, let’s talk a little bit about what you should put into each article

Title of the article

The title of the article has to contain the long tail keyword, exactly. Following our “internet voicemail” example once again. Let’s say our long tail keyword was “voice mail over the internet.”

Any of these titles would work…

“The truth about voice mail over the internet”
“Does voice mail over the internet work?”
“A review of voice mail over the internet.”

…I think you get the point. Just put a little imagination to it. You want a title that has the exact keyword phrase contained within it, but that also makes it compelling to human readers. Remember…don’t dwell on any one part, here. The point is to take action. You can always go back and change your title, anyway. Now that we’ve got the title nailed down, let’s move to the more important part, the body.

Body of the article

It’s not so much the actual process of writing that puts a damper on things. It’s figuring out what to write. Until you get into the groove of writing, you constantly get writer’s block. What you should write about should obviously be related to the title that you decided on. So, if your article title is “a review of voicemail over the internet,” your article should focus on reviewing how it works and whether it works well or not.

Your review should say it works well – since you’ll be trying to get them to click through to your website in your author bio box, which we’ll talk about in just a bit. If you’re truly at a blank for content, then take 5 minutes to read other related articles and do some research on the subject and take some notes. Even a simple glance through Wikipedia, for example, can spark ideas for tons of articles.

I think it is important thing: Do not plagiarize any websites. You should just be using research to get notes…then you put the notes into your own words with your own ideas. Once you have a few notes jotted down, you’ll be able to scribble out an article in your own words with no problem. Make sure the article is of good quality, but you don’t need to be perfect with spelling or grammar. Perhaps, you can hire someone fluently in English to write it.

To determine if an article is of high enough quality, read through your own work or have a friend read. Did they find it was worthwhile to read? Did they get anything out of it? Was it valuable? If not, add some sprinkles of value. Use your brainpower to think up a unique prospective. You need to stand out. So, within the article, what can we do to maximize the chances that it gets ranked highly within the search engine?

A lot of people will tell you to do something called “keyword stuffing”. That means using the exact keyword multiple times throughout the article. That’s not the way to do it. Not at all. We want our articles to be of high quality to both people and the search engines.

That means, if your long tail keyword was “voice mail over the internet,” you only use that exact phrase twice within the article. Your article will be of higher quality by doing this, and both the search engines and the people reading your article will appreciate it much more. You’ll also get more clickthroughs to your website.

It’s also really easy to make your article much more readable. Instead of having longer paragraphs, or no paragraphs at all, break your article up a lot. Keep paragraphs to 3-4 sentences or less. It’s far easier to read and it will keep the flow going better. I have seen so many articles with great content that just turn into complete, unreadable mush because they don’t break up the paragraphs. It’s just one big blob of text. People won’t read it.

Short, concise sentences. Stick with those. One thought per 2-3 sentence paragraph. That’s all you need to do! Don’t worry, stick with me here. I’ll show you a solid example in just a bit. So far, so good, right? Let’s review. We know now that we have to write a 300 word article, broken into short, concise paragraphs about the long tail keyword we’re targeting, and that we have to use the exact long tail keyword twice within the article.

You also know that you can easily get ideas for content by doing a little research, getting ideas, jotting down some notes and then putting the information into your own words. Then you can re-read it yourself or with a friend to determine if it’s valuable or not. With that said, you should be able to pump out an article, no problem…

But there is one thing that we’re missing here. How to generate the critical “clickthrough” with our Author Bio Box…Write A Killer Author Bio Box. The author bio box is arguably the most important part of this entire process. It means the difference between a clickthrough and possible sale through your website or a visitor clicking the back button.

Read the next step …

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Best Regards

For Publisher