NY Hard Money Lenders Under Investigation

written by
1 · 16 · 14

Financial services firms making hard money loans are being investigated by a New York regulator for potential predatory lending practices.

Such lenders originate loans secured by a borrower’s residence or another property. The loans have short terms, high interest rates and numerous up-front fees.

Borrowers are not typically evaluated by hard-money lenders for their ability to repay or their likelihood of default.

Such practices have raised concerns by the New York State Department of Financial Services that some hard-money lenders may intentionally be structuring loans with the intention of taking back the properties through foreclosure.

So the department has initiated an investigation and issued subpoenas to nine hard-money lenders.

The lenders are Alston Ferris Capital Partners, IAS Group LLC, Liberty Lending Group, Manitoli LLC, Mercier Realty Inc., Meritt Funding Inc., PMG Lending Group, Quick Funding LLC and Rushmore Capital Partners.

Lenders are being asked to provide documentation on loan policies and marketing materials.

The state wants to determine whether hard-money loans are being structured with onerous terms — including “enormous balloon payments” — so borrowers are deliberately driven into default.

In addition, the DFS looking into claims that hard-money lenders are requiring borrowers to sign deeds-in-lieu of foreclosure at the point of origination — enabling lenders to take immediate possession of the property upon default. Such practices would deny borrowers the protections afforded by the foreclosure process.

The state said some hard-money lenders are able to stay under the regulatory radar and evade licensing requirements by avoiding advertising, changing their names or setting up affiliated entities.

New York Superintendent of Financial Services Benjamin M. Lawsky noted in the announcement that many hard money lenders are engaged in legitimate financial activities.

But other unscrupulous companies appear to be taking advantage of distressed borrowers by making loans that are designed to fail.

“Preying on consumers who are in distress is unacceptable in any form, but these types of ‘loan to own’ schemes are simply unconscionable,” Lawsky stated.


Mortgage Daily Staff


Consectetur adipiscing elit dapibus, vulputate in donec tempor ultricies venenatis erat, aliquam posuere urna habitant.