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Prospects brighten for hard-money lenders

Some borrowers have nowhere else to turn

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Like all disasters, the financial crisis has its share of beneficiaries who profit from it. One of them is the hard-money lenders, who lend strictly on the basis of the collateral. These non-institutional lenders require a lot less paperwork than institutions because they don't worry about whether or not borrowers can afford the payments, or whether or not they are creditworthy. They don't bother with income, employment or credit reports. If borrowers can't pay, the hard-money lenders get their money back through foreclosure. They typically require 30-35 percent down to make sure that there is enough equity available to cover foreclosure expenses. Interest rates are much higher than those charged by institutions, and terms are short. The earliest mortgage lenders of the 19th century were focused entirely on the collateral. Of necessity, they were hard-money lenders. There was no way to document anyone's income in those days, and credit reporting had not yet emerged. Over t...