Dangers of Lending Money on Your Own – A Word of Caution

Dangers of Lending Money on Your Own – A Word of Caution

Recently we’ve received a number of enquiries from Fisgard investors regarding private mortgage money they have lent outside of their Fisgard MIC investment. In these cases the investor lent money directly to a borrower. In short, things did not go well. These mortgages looked appealing at first and it appeared that the investors would receive a higher return than by investing in the MIC. Unfortunately this did not turn out to be the case, and the investors not only lost their interest but a portion of their capital as well. They also experienced a lot of stress through the collection and foreclosure process. Risk and reward were simply not assessed properly at the outset, and technical experience was sorely lacking.

In reviewing the cases presented to us we noted a troublesome trend in the decision-making process. Most investors did not choose the appraiser that valued the subject property; in fact in many cases the borrower had ordered the appraisal! That should never happen. Most investors did not understand the contents of the appraisal, including value adjustments made on comparable properties, nor had they been given an original copy or the authority to rely on the appraisal for legal purposes. In all cases the investors had not reviewed the borrower’s credit report, nor confirmed the borrower’s employment and ability to pay as agreed. In all cases the investors did not understand the enormous complexities and costs associated with the default, demand and foreclosure process. No one likes to talk about what can – and too often does – go wrong when lending mortgage money privately with the expectation of a higher-than-average return. It looks good at the beginning, but all too often turns sour.

There are a number of reasons a borrower cannot get a mortgage from a conventional lender or a Mortgage Investment Corporation such as Fisgard, and it`s usually because the borrower simply does not qualify for the mortgage (cannot service the mortgage debt or has insufficient job security or poor credit) or, most seriously, there is simply not enough equity in the property used to secure the mortgage.

These are just a few important aspects of the mortgage lending process that were missed or not given proper consideration by the well-meaning but unfortunate private mortgage investor; aspects that became very costly oversights in the end, resulting in large losses and enormous stress.

In contrast, at Fisgard your investment is managed by a dedicated team of professional underwriters and mortgage support staff with over 100 years combined experience in residential and commercial mortgage lending, property valuation and assessment of credit risk. Fisgard has financed over 2,500 mortgages and our investors enjoy good security and reasonable returns. We evaluate each mortgage proposal carefully not only with an eye to fair and adequate return for the particular loan, but security of capital. We also have a highly experienced default management team of lawyers, appraisers, realtors and construction consultants in addition to our in-house staff. These people are trained to act promptly and decisively when problems arise.

If you have made a private mortgage loan on your own and have any questions, we will be happy to assist you. Fisgard also purchases mortgages from individuals or companies wishing to sell their mortgages.

More than 4,000 investors have wisely chosen to place their mortgage investment funds with the professional people at Fisgard, where their investment is secure and stress-free.

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