{"id":227,"date":"2011-01-13T11:17:02","date_gmt":"2011-01-13T18:17:02","guid":{"rendered":"http:\/\/privatemoneysource.com\/broker-blog\/?p=227"},"modified":"2011-01-13T11:17:02","modified_gmt":"2011-01-13T18:17:02","slug":"the-private-money-lending-business-likes-and-gripes-part-ii","status":"publish","type":"post","link":"https:\/\/privatemoneysource.com\/broker-blog\/?p=227","title":{"rendered":"The private money lending business: likes and gripes (part II)"},"content":{"rendered":"

Clay Sparkman<\/em>
\nIn Part I, I began a discussion of my gripes and likes regarding the private money lending business and various industry related matters, items, and issues.\u00a0 I allowed myself to amble a bit far afield and concluded by mentioning a book about the legal profession which I personally found to be informing and entertaining.\u00a0 I\u2019d like to indulge myself a bit more on this topic of books at least marginally related to private money borrowing, brokering, and investing.
\nAn author who utterly fascinates me is Michael Lewis.\u00a0 Moneyball: The Art of Winning an Unfair Game<\/span> is one of the most interesting and influential books that I have read in a very long time.\u00a0 This book on the face of it is about baseball, but in fact it is about so much more.\u00a0 The book is really about exploiting pockets of inefficiency that inevitably exist in markets (for various curious reasons), and I frequently find myself applying lessons learned in this book to the way I think about other aspects of business and life in general.\u00a0 There is most definitely an element of applicability to the private money lending business.\u00a0 If you have read it, please comment and tell us if you don\u2019t feel the same.\u00a0 (A hat tip: to Charles Duck who gave this book to me and told me to read it some good four years ago;\u00a0 I\u2019m only sorry that I waited two years too long.)
\nAnother Michael Lewis book that became extremely relevant with the recent collapse of large financial firms on Wall Street (though written many years before and published in 1989) is Liar\u2019s Poker: Rising through the Wreckage on Wall Street<\/span>.\u00a0 This book chronicles the author’s years as a bond trader for Salomon Brothers.\u00a0 The inside look is riveting and terrifying at the same time, and may help explain how things could have gone so terribly wrong during the recent fall from grace.\u00a0 And I must mention Home Game<\/span>, Lewis\u2019s book about the business of parenting.\u00a0 As the father of a 4 year old boy, this book worked for me (though I warn you it is quite different from his other books, doesn\u2019t have much to do with business and investing, and you may not enjoy it if you don\u2019t have children of your own).
\nAs one who brokers and services private money loans, a thing that I particularly like is quite simple:\u00a0 I like it when the loan payments come in on time each month as per the contractual agreement and without any prodding from my office.\u00a0 Fortunately this happens quite frequently and it makes my life and the life of those who work for me so much easier.\u00a0 It also opens up the possibility for an extended ongoing relationship with the borrower.\u00a0 Most of our borrowers tend to need private money loans on an ongoing basis; they use them to drive a series of ongoing professional projects.\u00a0 And this is another thing I quite like in the business: ongoing, long-term professional relationships with borrowers, brokers, and investors.\u00a0 Things get so much easier when you know who you are dealing with.
\nI do not like it so much when borrowers become \u201cbad boys,\u201d having to be prompted and prodded each month to send in their payments, and consistently push the envelope, going beyond the boundaries of their agreement.\u00a0 This provides a certain level of strain, both physical and emotional within my organization and with certain of my investors.\u00a0 I will say, though, that I have had cases where the borrower paid just a few days past the grace period each and every month, almost like clock-work, and certain lenders really liked it, as they knew that the payment was coming and that it would be accompanied by a substantial late fee and default interest payment as well.\u00a0 This type of situation tends to push the yield up, so that a 13% loan may ultimately yield 15-16% to the investor over the life of the loan.
\nI do like it when borrowers who are having problems actively communicate and behave in a proactive and professional manner\u2014seeking to work with the investors in an attempt to navigate through their financial problems and with the intention of ultimately making good on the overall commitment.\u00a0 I have found that investors tend to be quite reasonable in working with borrowers who are reasonable–so that quite often a successful \u201cwork out\u201d is possible.\u00a0 In these situations there is ultimate satisfaction for all parties as everyone tends to benefit.
\nI don\u2019t like it when borrowers who are struggling put their heads in the sand and go into hiding.\u00a0 Once communication stops, there is no chance for a work out, and the only choice is to foreclose, go to auction, take back the property (if a higher bidder doesn\u2019t take it at auction), and then go about the business of marketing the property.\u00a0 This can still have a good ending and probably does as often as not, but the work involved is immense, and most loan servicers and investors would rather not go there.\u00a0 Fortunately, though this certainly happens, it doesn’t happen frequently (though a bit more frequently than usual during the difficulties of the past three very unusual years).
\nI do like the fact that investors generally have an option, in these situations to either foreclose judicially or non-judicially.\u00a0 The non-judicial option is faster, easier, and more predictable, but the judicial option allows a the investor to obtain a deficiency judgment should the property fail to fully compensate the debt\u2014and thus gives the investor an opportunity to recover any remaining obligation by chasing borrower income and assets.
\nIn Part III, I will be highlighting some web based resources that I find to be particularly useful, enjoyable, and impressive.\u00a0 If you have any sites that you feel enable you to make better moves and decisions as you invest in trust deeds, please send me a note, and I will most likely include your information in Part III of this post.
\nEnd of part II<\/p>\n

— Clay (sparkman@lendicom.com, 503-476-2909)<\/p>\n

Clay is Vice President of Fairfield Financial, a primary source for private money since 1964.\u00a0 Fairfield is currently targeting loans in OR, WA, AK, CA, CO, ID, FL, GA, ID, MT, NV, NY, OK and TX.\u00a0 To submit a loan to Fairfield for consideration: <\/em>http:\/\/www.privatemoneysource.com\/loanproposal.php<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Clay Sparkman In Part I, I began a discussion of my gripes and likes regarding the private money lending business and various industry related matters, items, and issues.\u00a0 I allowed myself to amble a bit far afield and concluded by mentioning a book about the legal profession which I personally found to be informing and […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_s2mail":""},"categories":[8,9,12],"tags":[42,43,44,45,46,54,55,56,57,58,60,61,67],"_links":{"self":[{"href":"https:\/\/privatemoneysource.com\/broker-blog\/index.php?rest_route=\/wp\/v2\/posts\/227"}],"collection":[{"href":"https:\/\/privatemoneysource.com\/broker-blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/privatemoneysource.com\/broker-blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/privatemoneysource.com\/broker-blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/privatemoneysource.com\/broker-blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=227"}],"version-history":[{"count":1,"href":"https:\/\/privatemoneysource.com\/broker-blog\/index.php?rest_route=\/wp\/v2\/posts\/227\/revisions"}],"predecessor-version":[{"id":1311,"href":"https:\/\/privatemoneysource.com\/broker-blog\/index.php?rest_route=\/wp\/v2\/posts\/227\/revisions\/1311"}],"wp:attachment":[{"href":"https:\/\/privatemoneysource.com\/broker-blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=227"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/privatemoneysource.com\/broker-blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=227"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/privatemoneysource.com\/broker-blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=227"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}