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Tales from the Lending Desk - Part 3

            One of the biggest challenges I face in my law practice is the outreach from individuals who have made loans years earlier that have not been paid back.  It fills me with sadness and regret for the client who reached out to me, but sometimes, there is absolutely nothing that can be done to make it right.  Thankfully, sometimes there are things we can do to help them get back at least some of their money.  Getting it all back is a rarity.

            Here are some red flags to look for before you agree to put your hard-earned money to work with someone:

  • Borrowers whose enthusiasm and urgency strike a chord with you.  Be careful!
  • Borrowers who play the “religion” card.  This one disturbs me greatly because as a person of faith who believes that Jesus is Lord of everything, I’m troubled by people who use “religion” as a smokescreen for their bad behavior and inability to pay back the loan.  I’m not saying that everyone who struggles to pay back a loan is a bad person.  Sometimes loans go bad well after they have been originated and funded, but other times, they go bad the moment the money leaves the lender’s control.  Be slow to trust and do so only after you have verified things multiple times.
  • Borrowers seeking to borrow more than what makes sense (going above a 75% LTV).
  • Borrowers who are unable to provide you with good financial information, like a pro forma, appraisal, etc.
  • Borrowers who do not want the money to go to a title company or closing attorney, but instead want the money given directly to them.  Have I seen instances where this was done and worked out?  Yes, but those are rare exceptions.
  • Borrowers who seem to have larger-than-life personas in the online space.  If a person has a good social media presence and will acknowledge both their wins and their losses, particularly the lessons they learned from their mistakes, then that red flag can be lowered.  If, however, they are always absolutely crushing it on social media and nothing ever goes wrong, I get deeply concerned.

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