Big & Small Loans has strict policies and underwriting criteria that we do not deviate from.
We are risk-adverse lenders and our policies and criteria have been developed
to protect both our borrowers and ourselves. Our goals are to make safe loans
where all parties can generate adequate return on investment.
Big & Small loans Policies
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- We ALWAYS check every loan request against our personal (or company) Underwriting Criteria.
- We ALWAYS stick to our LTV limit as noted in our underwriting criteria.
- We NEVER loan money without receiving & reviewing an appraisal & prelim (preliminary title report) on all properties used as collateral.
- We STRICTLY limit our loans to NOO (Non owner-occupied) properties.
- We ALWAYS drive by the house (if possible) or get pictures from the appraisal.
- We ALWAYS use a hard money broker to process real estate loans.
- We ALWAYS use an appraiser and/or BPO Agent that is local to the property location, specifically one that knows the neighborhood well.
- We will ALWAYS be in 1st or 2nd loan position and will ALWAYS verify which position we’re in.
- If we’re going in 2nd position we must have copy of the 1st Note along with the latest payment stubs. We know the current balance of the 1st and terms, such as whether or not there are any prepayment penalties.
- For every loan we do, we will compare interest rates, loan constants and duration of loans to our money borrowed from our money source. Duration of the loan from the money source to us will be MORE than the duration of the loan we make to the borrower.
- If the property requires major rehab or if we sense that the property has potential structural problems, we will request the hard money broker to have a physical inspection of the property done at the borrower’s expense to verify the repair costs.
- If the borrower has a low credit score that won’t qualify for a refinance loan, we will require a qualifying co-signer that can and will co-sign to refinance at end of term if necessary.
- We ALWAYS examine and cover the down side of any deal BEFORE we consider the upside no matter how enticing a borrower or deal may appear.
Regarding the closing:
- We ALWAYS ask our broker to prepare all documents. This allows us to comply with all laws and regulations.
- We ALWAYS use an escrow/title company to collect and distribute all funds; we NEVER accept OPM funds personally or give borrower any funds directly.
- We ALWAYS get lender’s title insurance (borrower pays for this).
- We ALWAYS make sure borrower carries adequate hazard insurance throughout the period of the loan, and we verify that we are on borrower’s hazard insurance policy as loss payee.
- WE ALWAYS make sure loan broker hands us all signed disclosures for our records including closing statements.
- We ALWAYS use attorneys to draw up our promissory notes, especially if they include “non-standard” terms.
- We are ALWAYS aware of new changes in the relevant law – We use an attorney that knows the usury laws.
- We consistently do more short term loans (1 year or less) than longer term loans.
- We consistently do several small loans across many deals as opposed to a small number of larger loans across fewer deals.
- We ALWAYS maintain the highest ethical and moral standards for our private lending business.
- We NEVER compromise our own operating principles, and we respect the same of others with whom we associate.
Criteria for making SAFE LOANS:
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- ALWAYS have and follow “My Policies” document.
- ALWAYS have and guided by “My Underwriting” document.
- Have “My Team” in place and refer to “My Team” document.
- Have and guided by “My Risk Management” document.
- Possess an understanding of how to appropriately and effectively work with my team members.
- Possess an understanding of the basic content of The Banker’s Code training material.