Money Talk with Leonard Rosen

The U.S. housing market had a another schizophrenic month in April with foreclosures on the rise. Leading hard money expert Leonard Rosen of Pitbull Mortgage School shares his thoughts on the current state of hard money lending, hard money commercial and real estate loans.

1. What is hard money and how does it work?

Hard Money is money for any type of real estate transaction that does not conform to traditional banking criteria. They are equity based loans in which borrowers credit score is not taken into consideration. It can be used for Residential, Commercial, Construction or Raw Land. The investor/lender does appraisal and borrowed should have 25% equity. Based on value and equity they can borrow against that. It can be used for foreclosures, defaults, etc. It works for Commercial borrowers that do not meet minimum loan requirements.

2. Is hard money predatory or at the very least not moral?

Residential Hard Money allows borrowers more time, breathing room from foreclosure or defaults. Hard Money is more expensive but is a big risk for the investor/lender.

3. How expensive is this type of mortgage?

Average is Residential- 10.5% and if it is a type of 2nd mortgage is averaged to about 15%. Depending on area of the country and how much equity the borrower has.

4. Why would anybody use hard money for a mortgage?

Hard Money is not a solution for everyone. For example on a Commercial Project- stopped because of no funds- the builder has 3 options 1. Stop the project 2. Take on a partner or 3. Hard Money. Hard Money is less expensive then bringing on a partner.

5. What are the benefits of using this type of product?

For residential borrowers- stops foreclosure, gives time, gives options.

For commercial borrowers- paying the high coupon cost is less expensive then bringing on a partner.

6. Does this product have any other applications in real estate?

There is always specialty financing. For example taking a specialty loan can be either a participating or non participating loan which means the investors can charge the interest or take share in the property. And if is a type of 2nd mortgage loan then the charges are the going coupon rate which is negotiated through the borrower and the investor/lender.

Rosen adds, "Hard money is a lifesaver for many families across the country and it helps people going into foreclosure or default by allowing them time to get their house sold or rented out.