Owning this website, I come into contact with many direct lenders, mortgage brokers, borrowers, and others in the lending circle.
With all due respect to the thousands of professionals here, I feel the need to do a little educating so we really know what a lender is:
A DIRECT LENDER: Owns or works for a company that lends it's own funds. Sources of funding vary but main sources of funds include their own lines of credit, investors (financial backers), hedge funds, insurance companies, and several others. The most common source would be private investors that will fund based on predetermined parameters that make the investor(s) feel comfortable that he or she will be getting their money back according to the terms of the loan. A DIRECT LENDER does not shop loans or look outside of their own company for funding, they have the funds!!!
A MORTGAGE BROKER: The job of the Mortgage Broker is to do one thing... Connect the person needing funds with the provider of those funds. A Mortgage Broker is a middleman, an intermediary, and often a very valuable professional in the search for financing but a Mortgage Broker does not in any way have funding or any decision whatsoever in who gets financed and who does not.
A Broker used to be and in my mind still is a very important part of lending. Unfortunately, several hundred bad or dishonest brokers have given a very bad name to what hundreds of thousands of men and women do for a living, which is find funds for those in need. I have personally been both a broker and after that a direct lender with my own personal investors and one thing that I hate more than any other is brokers that call themselves by other titles so that you will not realize that they are just that, mortgage brokers. When you say you are "direct to the source", what does that even mean? I work 3 blocks from Wells Fargo bank. Does that mean that I am direct to the source? I have their phone number and know the manager personally and they lend money for real estate transactions. Does that mean that I am direct to the source? Being"direct to the source is not impressive". That means you are a broker who is embarrassed to say you are a broker so you have come up with a phrase to mislead people. "Direct to the source" would be an intermediary, a broker, or anyone else that is a "funding finder". There is absolutely nothing wrong with being a mortgage broker, it is a great job with amazing flexibility. The problem is that after the housing market went down in 2008 and 2009, "broker" became a bad word so now we have people pretending they are something other than brokers, saying they are "direct to the source". You are not direct to anything, you simply have a phone number and an email address for a company that provides funding for real estate transactions, just like 20,000 other people on this site. Take me for example, I have more sources than everyone reading this blog combined but if I decided to get back into the business and help people find funding, you know what I would be? I would be a mortgage broker! The most well-connected broker in history, yes, but I would be a mortgage broker. Guys, you have a good and honorable job. Just call yourselves what you are, Brokers! The moral of this little rant... Just say what you are!!! Be honest and upfront and people will appreciate you and trust you.
To whom this concerns,
I'm sure this was posted to just read, but I wanted to add.
I feel this is an interesting rant and perspective, as I think some of it falls into a gray area, especially when it comes to hard/private money, whatever semantics want to be utilized. In CA and I'm sure some other states, but especially in CA, most hard money lenders are set up as BRE brokers, where the person putting the money out or brokering the money is doing so on behalf of individuals that are actually putting up funds. And then from there, it just depends on structure. Some brokers actually do have their own funds commingled with their investors' funds, or at least sometimes are funding deals with their actual money, not just their investors'. Others don't have any of their own money into deals at all and in essence are still 'brokering' even though they are considered DIRECT hard money lenders.
There are very few individuals that are actually putting out their own funds on their own with no help whatsoever and if they are, they usually aren't incredibly deep pocketed (maybe a few mil at a time) from what I've seen. The reason is because most of the time these investors want to find good deals to put their money in and while they may have money, they don't have all the front end taken care of - the marketing, the network, etc., to put their money to work, and thus don't have enough solid deals.
....While I did go somewhat on a tangent, I think your point is clearly made from your posting. A direct hard money lender even if set up as a broker, will not look outside themselves to get the deal done because they have the money. If they don't or the deal doesn't suffice, they will turn it down and move to the next one. There is no 'shopping,' which is what an actual mortgage broker is going to do - find the lender, whether private individual or institutional and then match that borrower with the lender.
And I totally agree with the above about the mortgage broker. There should be no hiding of what you are or trying to cover 'broker' with a different name because it's usually going to be found out sooner or later. If you structure deals and are transparent, it will be noted and it doesn't matter. If you're doing a solid job, then you should get a fee and it will be deemed earned, at least that's what all my clients tell me.
Thanks for this. Just putting in my .02
What you have said is very true. In particular, your last line: "Be honest and upfront and people will appreciate you and trust you." This extends well-beyond commercial mortgages-- it goes into almost every other area of finance. The Internet has killed a lot of quality businesses by opening the floodgates to anyone with a PC or Mac. Thank you for echoing the sentiment. The Golden Rule is still the gold-standard in behavior.
I agree, but as most of us brokers know, direct lenders are not very adept at marketing their programs directly to investors. They have originators, but they predominantly market.....to brokers. I am proud to be a broker, and a damn good one at that. I won't take on an assignment unless I have a solution for the client.
Hi Darryl, if you have clients seeking financing for owner-occupied commercial real estate, please contact me. I am with Northeast Bank, a National preferred lender headquartered in Boston, MA. I am in NJ. We offer loans ranging from $300K to $5.0MM.
Hi Darryl, this is true about lenders mostly marketing to brokers. And I am not an exception. :) I represent a Federal Bank. We are a non-prime bank, we work with conventional turn-downs. We pay our brokers undisclosed rebates, while not charging your client any upfront points. Our rates are in the range of 4.5-6.5%. I'd love to tell you more about us if you are interested. My phone # is 617-833.1565, my email is email@example.com.
Very well said Admin.
Hi, Northeast Bank is a direct lender. We are headquartered in Boston MA. We are a National SBA Lender. I am located in NJ. We offer loans from $300K to $5.0M for a variety of industries. We focus on the purchase, refinance or expansion of commercial real estate. We work with brokers and can pay a referral fee.
How can you help me connect with reliable contacts?
Just sent you and email with my contact information and an overview on a project.
Riverstone Capital Consultants
As a real estate investor, I became interested in the Mortgage business because it always amazed me how overwhelming could shopping for mortgage rates be. Every time that I was offered a rate, it seemed that the agent hiked up the rate purposely to benefit more from the deal. I chose the mortgage business as a career because I understand the people’s need for professionals who strive to uphold the integrity of this industry.