Let me try ths one more time! I'm worried!

To bring you up to date, this is a continuation of the review of the laundry list of “red flags” waived about investing in Bank of the Internet (BofI) that was posted and highlighted as “Post of the Day” this past weekend. My aim is to review what was written, analyze each bullet point to determine which ones are true, false, misleading, or perhaps irrelevant. Again, if you’re uninterested in BofI or tired of these posts, please click Ignore Thread or skip this post. And I promise not to bore you with anymore until after the holiday. :slight_smile:

Next up, is BofI skirting regulations and acting illegally?

SaulR80683 writes:
Okay, so they are helping this shady company evade banking laws by opening loans for them and selling them the loan after 24 hours…

I believe Saul is conflating an accusation (BofI is helping an unlicensed lender evade regulations by acting as a front for their loan activities) and a common marketing pitch of “hard money” lenders (24-hour turnaround on loans).

Let’s turn to the Seeking Alpha article by Aurelius to see: he claims that one of BofI’s customers, the “apparently unlicensed Center Street” Lending, “specializes in highly suspect, single family ‘fix and flip’ loans requiring ‘no doc’, ‘no FICO’, and ‘no income verification’.

False and false.

First, remember that Center Street Lending is a customer of BofI and Aurelius is trying to make you believe that anything bad he has to say about Center Street Lending applies to BofI as well. Innuendo.

And Aurelius is wrong: Center Street Lending is licensed in California.

Here’s its Mortgage Loan Origination license: http://www2.dre.ca.gov/PublicASP/pplinfo.asp?License_id=0188…

If you’ll scroll to the bottom and look to the left of the linked document, you’ll read in the comments section the words NO DISCIPLINARY ACTION.

And while you’re at it, click on the link to the right of MLO License Endorsement: 905781 (Click here to check the status of the MLO License Endorsement.) and you’ll go to the NMLS Consumer Access database where you can examine additional details about Center Street Lending, including, at the bottom of the page, any Regulatory Actions taken against Center Street Lending. What you’ll see is this: No regulatory actions have been posted in NMLS.

Now, let’s explore its risky,”highly suspect, single family ‘fix and flip’ loans.”

Here are the Underwriting Guidelines from the Center Street Lending web site:

Loan to Value (“LTV”):
The maximum loan to value is 65% of the as repaired value of the property.

Minimum Down Payment:
Borrowers are required to contribute a minimum of 20% - 30% equity for each loan. This must be in the form of cash consideration, not “created” equity.

Personal Guarantee:
Personal guaranties are required for all loans for the entire loan amount. If a borrower is an entity then a personal guarantee is required by the entity owner(s). If the borrower is an individual, then the guarantor cannot be a spouse.

Interest Impound:
Borrowers are required to deposit up to two months of interest payments at loan closing that are held in case of a loan default to be applied to the borrower’s account at Center Street Lending’s discretion. In the event that the borrower complies with all of the terms and conditions of the loan, the interest impound is credited to the borrower at full loan payoff.

While we’re at it, let’s address Aurelius’ allegation that Center Street Lending “provides credit lines as well as construction loans for ‘investors who plan to build homes on vacant land’" (implying the vacant land or commercial loans are collateral). Well, wrong again.

Prohibited Collateral:
     **Vacant land**
     Multi-family rental properties over 4 units
     Mobile homes
     **Commercial properties**
     Construction loans
     Partially constructed properties with significant unfinished work

Bottom line time: Center Street Lending is licensed, has no enforcement actions lodged in the California Enforcement Actions and Orders database (see here: http://www.dbo.ca.gov/ENF/Default.asp), limits LTV to 65%, requires a minimum of 20% - 30% equity for each loan in cash, personal guaranties are required for all loans for the entire loan amount, and borrowers are required to deposit up to two months of interest payments at loan closing that are held in case of a loan default.