The point I was responding to was one you raised when you couldn’t find any licensed “hard money lenders” on that California database.
I am telling you I can find a half-dozen or more and print them out here in one-hour should this guy/gal call me out to do so.
And your contention that private lenders don’t have to be licensed at all in California is incorrect too. Don’t fret, I was suspecting that was maybe the case too until I did some further re-reading.
(I read a 29 page California State House White Paper about this licensing brouhaha from I believe 2012, which I somehow lost in the transfer of this post from Google Docs. I apologize. I will try to find it again and paste in my next response. But the one thing I did find from reading it is all money lenders have to have one or the other licenses to lend money in California, even if you are private investors pooling your money. If caught without a license, the State will send you a cease and desist order. If you fail to comply, they send in the people with badges, with alphabet names, etc.)
Still. after re-reading a Sac Bee article, I think we can now lay to rest why some of these “hard money lenders” are licensed as Realtor’s and some licensed as “money lenders.” Regardless, to lend money in California, legally, you absolutely, positively better have a license from one of these legal licensing agencies:
Here’s the link:
http://www.sacbee.com/news/investigations/article2573306.htm…
Headline: ‘Hard money’ lending has sordid past in Nevada County
My note:First some background on the problems the state had with “hard money lenders” in the last go-round:
The recession laid bare the dangers of hard money lending. As large, risky loans went bad, many investors lost their money and were left with nearly worthless land. Unlike banks, brokers carry no insurance and receive no bailouts. Regulatory and legal filings show that hard money investors lost more than $50 million in Nevada County.
Law enforcement agencies have tried, with limited success, to address what they see as a statewide problem of large proportions. State officials recently ordered a Sacramento hard money operation, VLD Realty, to cease operations. A Santa Rosa broker has been accused of stealing millions from investors. The U.S. attorney’s office indicted a Monterey County broker in late 2009 for operating a Ponzi scheme.
At the market peak in 2005, roughly 340 of the biggest hard money brokers in California loaned $5.8 billion. While that represents a small slice of the overall lending picture, the California Department of Real Estate spends disproportionate resources investigating and disciplining bad hard money brokers, officials said.
A Bee review of licensing records found that one in four of the biggest hard money brokers operating when housing prices peaked has been accused of wrongdoing or sanctioned by the department in the past decade – a far higher rate of violations than for conventional mortgage brokers.
Next, from the same article, this paragraphs on licensing:
Hard money brokers operate under a weak, loosely monitored set of regulations riddled with loopholes and jurisdictional confusion and conflicts. The state Department of Real Estate oversees some brokers while others fall under the purview of the Department of Corporations. Activities one agency deems illegal might be permitted by the other."
My latest research shows BOFI does business with licensed “hard money lenders” of both persuasions.
(Aside: For those wondering how the term “hard money lending” came about, it comes from the onerous terms of the loans that are “hard to swallow.” I learned that from the Sac Bee article too.)
So Center Street Lending has a Realtor’s license as I once noted in an earlier post. Now we know they can legally lend money.
Still, this doesn’t mean Center Street Lending is doing business in an upright way. I’m not giving these louts a “Get Out Of Jail” card or “Pass Go, Collect $200” option. (“Hey look, guys, I got my driver’s license! Let’s crack some beers and take my Monte Carlo SS out to the highway and see how fast we can go!”)
So let’s revisit Center Street Lenders, owners of a Realtor’s license in California, licensed one of two ways to “legally” set up shop as a “hard money lender” in that state. (But I’ll bet not for much longer.)
Let’s look at just one big borrower of Center Street Lending and see what kind of person qualifies for big loans from them, sometimes, using BOFI loans.
Center Street Lending has made 86 loans in four years worth $20 million to just one con-man who:
a) Was convicted of five felonies earlier this Century
b) Was sentenced to two years in prison.
c) Was forced to pay $1.2 million restitution as part of this sentence
d) Changed his name to hide his past (Christopher Lee became Rashid Khalfani, I kid you not.)
e) Recently pled guilty to “forgery” (2013). (p.s. Despite this, Center Street continued lending to Khalfani.)
f) The SEC has currently frozen his assets
g) Is being sued, and the receiver in this suit, accuses this con-man of running a Ponzi scheme. (Well, hell, why not? Let’s go big, or let’s go home to prison, right?)
h) Furthermore, this receiver claims Center Street, knowing of this man’s past fraud and current peccadillos, still lends him money to to pay off old loans they’ve extended him AND to suck in more non-savvy private investors. (Many of these non-savvy private investors are elderly retirees. Some of these “hard money lenders” have been prosecuted in the past for “elder abuse” in California, according to news articles.)
In the receiver’s court-documented words about Center Streets Lending’s enabling (my word) this charlatan, Rasheed Khalfani, to continue business as usual, the receiver claims Center Street . . .
" . . .could have and should have known that Capital Cove could not turn a profit on the properties that it was purchasing when considering all of the liens placed against the properties, the cost of refurbishment, the carrying costs for the properties including insurance, taxes and interest, as well as the closing costs, commissions, late fees, and taxes to be paid upon the sale of the properties."
Again, this is just one background check on one huge series of very dangerous and shady loans to one hell of a brazen scam artist. How many more are out there waiting to implode in the long arms of the law?
Knowing this, knowing that BOFI is working with or “sponsoring” loans to Center Street, knowing that Garrabrant’s credentials (law degree) and past work history, do you not wonder how BOFI’s CEO can still assure investors his company does diligence with a conservative bent?
Seriously, would you call this smart underwriting or “safe” asset quality? Would you?
Knowing just that one story about Center Street, I asked investors yesterday would they lend money out of pocket to Center Street? No one answered me.
Let me amend that. Would you lend Center Street money for just a day with a promise to pay you high interest for the one day loan?
How about this: Would you lend money to a Mafia member or a housing project drug dealer who promises you a huge return on your money 24 hours from now?
You see where this might get dangerous to your wealth - and health?
The Mafia guy might kill you.
The drug dealer might get arrested.
And the “hard money lender” might all of a sudden have its assets locked up while the Feds and state start discovering “How did these crooks get their funding?”
And then that’s when the SHTF for the stock prices of BOFI and especially when authorities inspect their books and now “Whoops, you seem to have a lot of these “hard money loan” deals hidden from view. We’d like to take a look at everything you got.”
(There’s precedent for this, loads of precedent. Again, the Bee says one in four hard money lenders fell afoul of the law, went bankrupt, fleeced banks and other lenders with Ponzi Schemes, and in most all cases, investors lost “ALL” of their savings to these loan sharks. Many of he characters involved are still serving prison terms.)
Again, BOFI is not just extending loans to Center Street Lending. And Center Street Lending is not the only “hard money lender” with criminality running through its DNA, which BOFI gives loans to, gladly.
I will discuss more of your points raised in a look at some of BOFI’s other business partners in “hard money lending” in the next part of my response later. Oh, and wait until I explain “legalized loan sharking” to you in spades when it comes to some of these companies versus say a credit card company with high APR.
I’ve got some football to watch.
Later.