California's Hard Money Lender Since 1988

Call Today! (707) 523-2099

Becoming An Investor With Us

Becoming an investor with us is a pretty straightforward process. After contacting us to be an investor, we will send you a “welcome email” and add you to our Investor email database. This database is managed by our Marketing Director and never shared or sold. In this Investor welcome email, we include the following attachments :

  1. An example of what our Trust Deed Offerings look like.
  2. A legal Investor Questionnaire form which is simple to fill out and is required prior to investing in any TD offerings.
  3. CA Bureau of Real Estate Trust Deed Investing booklet for further information on investing.
  4. A 2017 Investor Newsletter from our Broker to our Investors.

When You Receive Trust Deed Emails From Us

If you have any interest in an offering, reply to the email as soon as possible. Do not delay hours or days doing further research, because these opportunities go quickly.  Your response goes directly to both our Broker, Forest, and our Lead Loan Originator, Ken.  They will know you have an interest and will respond to any questions you may have.

If it is decided you are going to be the Investor for a particular loan, Forest/Ken will email you a full loan package, and at this time, you can do a more thorough review of the opportunity.  If the trust deed has already been sold, you will be informed and they will keep more offerings coming.

Sun Pacific’s Lending Model

Our Background In Lending

My Wife Lynn and I have been in the loan business for almost 30 years.  We have personally executed or been responsible for thousands and thousands of home loans in California.  Sun Pacific Mortgage has a California Bureau of Real Estate Broker License,  and I am the principal Broker.  We also have the federally mandated Nationwide Mortgage Licensing System (NMLS) License.  

6 or 7 years ago we were doing all loan programs, from the 30 year fixed rate programs to Hard Money.  Then the underwriting guidelines for the 30-year fixed rate programs became too restrictive, so we decided to do only Hard Money loans.  Since then we have expanded to the point where we fund over 20 loans per month.  In April 2017 we funded 24 loans for almost $8 million dollars.    

Because all we do are Hard Money loans, we are expert,  and most importantly,  compliant with the myriad of regulations that apply to hard money.  We are active members of the Hard Money organization CMA (California Mortgage Association)  and attend all of their 4 annual conferences.  At these conventions we receive training on current hard money regulations and learn how to comply.  Professionals explain proposed legislation impacting the industry.   

We have on retainer, and regularly consult,  the number one Hard Money attorney for CMA, Dennis Doss, to make sure we correctly interpret and apply any and all state and federal regulations.  

Our loan docs are specific to hard money and customized to conform precisely to federal  and state regulations regarding hard money.  They are monitored and updated on a regular basis by our hard money doc service.

We subscribe to the Dodd-Frank Update and the RESPA News.  We read their frequent  publications from cover to cover allowing us to stay on the cutting edge of our industry.   

We do all this on your behalf because you are the Lender.  Our compliance makes you compliant.  

Owner Occupied Principal Residence Lending


Let me start off by saying that I will always do loans to homeowners that are owner occupants. It is an important segment of lending and a heck of a niche for my office. It also has the most regulation by the state and feds who, in their infinite wisdom, have decided that this category of homeowner needs protection. Lots and lots of protection.

I will also tell you that there has not been a foreclosure of an owner occupied loan (that I am aware of) for the last 6 years. This is key.

These are generally very good loans. Most are just shy of getting 30 year fixed rate loans at or under 4% from what we call “A” paper lenders like Wells Fargo, Chase or B of A. Most are turned down due to something in their credit. Second most are turned down due to income. Problem property is the third reason. All the turned down loans that we write have down payments of between 20% and 60%.

Many mortgage brokers have backed off of this type of loan. My guess is they have been run off by the profusion and confusion of regulations. The tragedy is, they have run a lot of investors off of this type of loan. And really, it’s not that tough to know the regulations and comply. Yeah, there has been a lot of regulation, but my viewpoint is that you get your wits around all of it and simply comply with the fed and state mandates and you do these loans. So that’s what I do and that’s why I promote this type of loan.

Almost all of the owner occupied loans that we write have an “exit strategy”. We never used that term before the proliferation of fed and state regulations in response to the recession, but here it is. We write these loans as 15 years loans but I would wager none will go to that term. I looked at the statistics of the owner occupied loans we have written that are serviced and the ones that had paid off lasted an average of 11 months. So we make 15 year loans but they most likely will not last that long. And if they do, hallelujah!

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One thing I must mention that I think increases the security of those loans, is the fact that the feds require they be impounded for the payment of property taxes and insurance. The feds did get that one right. You know every month that those items are paid and not accumulating.

The feds also require that the Borrower on an owner occupied loan demonstrates an “ability to repay” the loan. We don’t even write the loans if they cannot prove they can repay the loan. We turn down quite a few requests, even with a ton of equity, because they cannot prove their income.

Last item to mention is that the feds mandate these Borrowers do a consumer credit counseling class before the loan records. The counselor takes the disclosures for the loan and does a budget talk with the borrower. It’s done over the phone and takes about 45 minutes to an hour. This theoretically makes for a more informed Borrower. Makes sense to me.

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So, statistically, owner occupied loans don’t get foreclosed upon, the loan to values are good, they have an ability to repay the loan, they have an exit strategy, they pay the property taxes and insurance monthly, they do a consumer credit counseling class and the properties will likely appreciate in the coming months and years.

That’s why these loans are a great investment.

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I will always offer loans to homeowners that are owner occupants. It is an important segment of lending and a heck of a niche for my office. I will say that the feds have brought about a lot of regulatory protections for this class of Borrower, but that is simply because they have determined home ownership to be such an important right and should be protected. It’s kind of like car seats for kids, seat belts, speed limits, food labels, movie ratings, warning labels on medications, etc., etc.

I will also tell you that there has not been a foreclosure of an owner occupied loan originated by my office (that I am aware of) in the last 6 years. This is key.

There are really just 2 quasi-objectionable regulations that apply to owner occupied transactions.

    1. The loans can be rescinded for up to several years if the correct disclosures were not made at the beginning of the loan. Rescinding a loan means that the Borrower gives back the principal and the investor (and the Broker) give back the interest and the fees. I asked our attorney about the incidence of this and he had no answer. I have never heard of it happening. I have also done tons of research on line on the subject and cannot find case law that applies. That is proof that, while there is lots of regulation, the occurrence of legal problems with these loans must be minimal as I cannot find anything on the subject.
    2. These loans take longer to foreclose upon. As these loans are required to be serviced, this is a servicing question. The regulation requires you wait 120 days to begin the foreclosure process. Then it’s just the regular foreclosure timing. From my experience, most investors would wait this long at least. Add to that the fact that we have not had a residential foreclosure (that I am aware of) in the last 6 years and it really is much ado about nothing.

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So, statistically, owner occupied loans don’t get foreclosed upon in any significant number (zero in my office), Borrowers do not rescind the loans in any significant numbers (I cannot find any mention of it on line), the loan to values are good, they have an ability to repay the loan, they have an exit strategy, they pay the property taxes and insurance monthly, they do a consumer credit counseling class and the properties will likely appreciate in the coming months and years.

So if you hear mention of avoiding these loans, show whomever has said it these articles. These loans are important and a very good investment.

Fractionalized Loan Investing

fractionalized

Funding Large Loans…

Dear Investors…

Thought I’d interject here a little note about fractionalized loans, as we are doing an ever-increasing number of them.  These loans are required to be serviced, with few exceptions.  The reason is, as a lender you cannot receive funds on behalf of someone else unless you have a trust account.  There are probably other reasons buried under the 3,300 pages of Dodd/Frank but that is the main one.

It will cost you a monthly servicing fee per investor.  Those monthly fees vary from servicer to servicer.  Usually we allow the investor with the most money into a fractionalized loan to dictate what servicer to use.  We can send you a current list of those upon request.  Each servicer will have their own servicing agreement which spells out what will occur, if and when a loan gets into trouble.

Finally, if those loans get into trouble, the general idea is to file for a foreclosure as soon as is practicable.  If on the rare chance the foreclosure goes through and the fractionalized group gets the property, the idea would be to sell it as soon as possible.

FRACTIONALIZED LOANS

To get some of the larger loans done we have had to “fractionalize” the loan.  This is the formal term we use that describes having more than one investor contribute funds to get the loan done.  As an example:  $750,000 loan amount and 2 investors each invest $350,000.  Another example:  Same loan amount of $750,000, but Investor 1 funds $300,000, Investor 2 funds $200,000, Investor 3 funds $200,000 and the final Investor funds $50,000.  This is a very common investment tool.  

Here are some of the pros and cons of “fractionalization” from the Investors viewpoint.

Pros first: These are just a few of the reasons to do a “fractionalized” loan. 

  1. This allows you to have a share in a very good loan spreading the risk to a number of investors.
  2. It allows you to get your money out there rather than waiting for a loan that fits your available funds.
  3. You don’t have to have all your eggs in one basket. Rather than doing just 1 loan you spread your investment dollars around on a number of smaller investments.

Cons:

  1. All investors need to agree on a course of action if the loan gets into trouble. This is only real con I could come up with. I must point out that this has not been an issue in the past 5 or 6 years as we have not had a residential foreclosure in that time, that I am aware of. The decision that matters is to foreclose or not foreclose. It’s usually pretty obvious.

Fractionalization can be an amount from $100,000 to $1,000,000. Hopefully this description of “fractionalization” can expand the opportunities for you as the Investor.

Interested in Investing With Us?
Call Today! (707) 523-2099

Ken Walker & Forest Tardibuono
“The Guys in the White Hats”

Sun Pacific Mortgage & Real Estate

800 Mendocino Avenue #2, Santa Rosa, CA 95401

CA BRE License # 01464899
NMLS # 360993


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