Company X is poorly managed and consistently looses money.
You go to company X and they arrange a hard money of $100k loan for you at 50% LTV at 12% interest only (first position) for 2 years.
(in other words you lend $100k of your moneyfor purchase of a home valued at $200k and the buyer puts $100k down -- and you get the first trust deed.)
So now, your principle is guaranteed because you carry the first trust deed at a 50% discount to market value.
The broker who arranged the loan will charge POINTS - typically 3 to 10 - so let say the broker charged 6 points. The broker's commission is then $6000. This is the actual money that goes INTO COMPANY X for the transaction. Now the broker/agent depending - is going to make between 50 to 80% of that commission. Whatever is left over goes to company X
IOW - they could have a thriving hard money loan business /fund but that does not necessarily translate to a thriving business.
These guys have obviously made some serious errors in judgement. They have burnt though millions with nothing to show for it.
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