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Aug 29, 2018

Can you sue a hard money lender for fraud?

A hard money lender is a place where individuals can secure loans outside of the traditional methods. These lenders usually are usually funded by investors, and loans are secured based on assets rather than credit worthiness.

If for some reason you believe you have been victimized by a hard money lender, you do have recourse. An number of these institutions have been sued for predatory practices.

While a number of hard money lenders are legitimate, there are a number of fraudulent operations that will steal clients blind. The Securities Exchange Commission (SEC) has received literally thousands of complaints each year from individuals who have been defrauded.

Sadly, many people who use hard money lenders don’t bother to check them out. Several turn out to be little more than Ponzi schemes. The bottom line is, if you feel you have been taken advantage of by a predatory lender, you do have legal recourse. Speak with a lawyer who handles bank fraud for advice.

A number of phony mortgage lenders popped up in the wake of the banking scandal of 2008. Most of these shady mortgage businesses offered loans at extremely high interest rates. Once the customer begins to pay off the loan, the interest rates and the customer finds themselves facing foreclosure.

Los Angeles-based mortgage expert Julie Aragon says “all money isn’t necessarily good money.” Sometimes people believe that obtaining a loan that doesn’t require credit or income documentation is a good thing. That’s not always the case.

A number of individuals who invested in hard money operations have been scammed. Take for instance the case of the Woodbridge Group of Companies. The SEC says they scammed nearly 8,500 investors who thought they were putting their money into a legitimate investments.

A number of investors were promised to receive 5%-10% interest off Woodbridge’s commercial loan clients who were paid 11%-15%. Robert Shapiro, who had direct association with organization, scammed investors with sham companies that had no income. According to the SEC, he swindled investors out of more than $1.2 billion. The scam was discovered once investors stopped receiving payments and Shapiro filed bankruptcy.

Individuals who wish to go the hard money route are encouraged to do research. More and more of these boiler plate operations are popping up everyday.

If you believe you have been a victim of predatory lending or investing, you should contact an attorney immediately. Only they can give you the best advice on how to proceed.

Hard money lenders can be sued. If your money is misappropriated in any way, or you find you have been lied to about pertinent facts regarding your loan, you should file a law suit. Depending on the situation, you may be able to get a portion of your money back. But you need to act fast. Like anything, these types of lawsuits have a statute of limitation.

Remember, before you enter into any type of agreement with a hard money lender, understand what you are signing. Also, research the company to find out if they are just some fly-by-night operation, or the real deal.

It’s your money. Be smart with it.

Investing in real estate is a great way to build long-term equity and earn some additional interim cash flow. When you are looking to purchase real estate, you may need to get financing to do so. One type of financing that you should consider getting is a hard money loan, from Delancey Street a small business loan lender.

What is a Hard Money Loan?
A hard money loan is a type of loan that is secured by real estate. This type of loan differs from a traditional mortgage a few different ways. One of the main ways that it differs is that it is normally provided by an individual investor, finance company, or investment fund, as opposed to a traditional bank. Along with this, a hard money loan normally does not have the same requirements as an investment loan mortgage, which means you can normally get one with less money down and there are less regulatory requirements.

Benefits of a Hard Money Loan
There are a variety of benefits that come with hard money loans, as opposed to traditional investment real estate loans provided by banks. One of the main benefits of a hard money loan is that you normally will not have to put forth as much equity as you would with traditional investment real estate loans. While a bank may require that you put forth a down payment of 25% or more, a hard money lender could provide you with higher levels of financing. This frees up a lot of additional equity and can boost your IRR.

Another advantage of a hard money loan is that they do not have the same regulatory requirements as traditional bank loans. This means that you may not have to guarantee the loan or go through as many hurdles that come with getting a traditional loan. Because of this, hard money loans can normally be funded faster and lenders can be more flexible with terms, which could align better with your business plan. This can make them a great option depending on what you plan on doing with the real estate.

Drawbacks of Hard Money Loans
While there are clear advantages of taking out hard money loans, there are drawbacks as well. One of the main disadvantages is that they are more expensive. Since hard moneylenders do not have the same cost of funds, they will normally have to charge you a higher interest rate and more fees than a traditional bank. This can make them more expensive, especially when the loan balance is higher if you do not put forth as large of a down payment.

Another disadvantage of a hard money loan is that your terms will normally be much shorter. When you take out a traditional loan, you may be able to get a term that is as long as 30 years in length with a fixed interest rate. When you borrower from a hard money lender, you will normally have to repay the loan much quicker than you would with a traditional loan. In many cases, hard money loans are considered a form of bridge financing that will have terms of no more than 3-4 years.

Can you sue a hard money lender for fraud?

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Phone

888-977-6335

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