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FAQ

A : A private money lender, also referred to as a "hard money" lender or "asset based" lender, is a lender that offers short-term loans based on the value of real estate that has been collateralized for the loan. Private lenders will generally fund deals that banks won't, and are typically much easier to work with than banks. Private loans are secured by the equity of a real estate asset and may have non-traditional qualifying guidelines. Private lenders can typically fund in just days, where most conventional banks take several weeks to several months.
A : We find investments that we invest in ourselves. We perform due diligence and facilitate the entire loan process. We also look closely at multiple exit strategies in the event of a default. This might include renting, redeveloping or selling the property. We act as a concierge service for our Investors and Borrowers by guiding the process from start to finish.
A : Borrowers typically turn to private money lenders due to less stringent guidelines, speed and efficiency. A Borrower who is looking to acquire a property in a short timeframe can use a private lender to get the deal done fast, then refinance at a later date with a traditional lender.
A : Due to the mortgage crisis, most large financial institutions and banks have made the mortgage application process very difficult and time consuming for potential borrowers. A borrower is frequently denied conventional financing if they are self-employed or they are attempting to obtain a loan secured by an asset class that banks won’t allow.
A : The Borrower plans to refinance out of the loan, or simply pay it off during the term of the loan.
A : The minimum investment required depends on the total loan amount, and varies from deal to deal.
A : This is a passive investment in the sense that after the lender has funded the loan there is nothing more for the lender to do other than collect checks from the loan servicer. Enact Partners oversees the process all the way through.
A : When we quote the interest rate to the lender it always represents net. We do this so our investors can easily calculate their annualized return. For example, an 8% investment will, in fact, net an investor 8% per year (pre-tax).
A : The typical foreclosure process for non-owner occupied loans is 90-120 days but it can take longer.
A : The loan servicer will execute the foreclosure process and proceed to sell the property at auction. If in a rare case the property did not sell at auction, the lender would take the property back by way of a credit bid. Once sold, the first position lien holder (lenders) will receive the loan amount, interest due, late charges and any other costs such as foreclosure fees paid to the servicer. If the sale of the property is insufficient to pay these foreclosure/legal fees, then each Investor would be responsible pro-rata their investment share.
A : If the property goes into foreclosure, we will manage the process and keep all parties apprised of the progress. We will hire a foreclosure company that specializes in foreclosures. Their fees are added to the payoff amount and will eventually come out of the foreclosure sale proceeds. If legal representation is necessary, each Investor will be required to contribute their prorata share of the legal costs (again, we manage this process through to the end). For example: you are a 10% Investor and 'upfront legal fees' are $5,000. You would be responsible for contributing $500. Regardless if the Borrower brings the loan current, pays the loan off or if it goes to foreclosure, your $500 would be added to the Borrower's fees and you will get the legal fees back. If we took possession of the property after foreclosure - albeit unlikely - each Investor would be responsible for their prorata share of the foreclosure and legal costs.
A : It is not unusual for Borrowers to be late in making their payments. Depending on how late, the Borrower will be charged late fees that must be paid off when the loan is paid in full. In some instances, Borrowers will be charged a "default interest rate" if they are delinquent for an extended period of time (typically 45 days). Many Investors benefit by this boost in yield due to late fees and default interest rate. If your lifestyle or stress level will be negatively impacted by a Borrower who pays late, we recommend you do not invest in 1st Trust Deeds.
A : The amount of paperwork and time is very limited. We facilitate all paperwork and we have efficient systems and processes in place to make the process as efficient and hassle-free as possible for all parties.