𝐖𝐡𝐨 𝐤𝐧𝐞𝐰 𝐩𝐫𝐢𝐯𝐚𝐭𝐞 𝐥𝐞𝐧𝐝𝐢𝐧𝐠 𝐚𝐧𝐝 𝑺𝒑𝒂𝒄𝒆𝒃𝒂𝒍𝒍𝒔 𝐰𝐨𝐮𝐥𝐝 𝐜𝐫𝐨𝐬𝐬 𝐩𝐚𝐭𝐡𝐬?!

Surprises can happen, even in a straightforward transaction.

Imagine this: a residential private mortgage closing today, my lender client has already transferred funds to my trust account and all security is in place with only 2 items outstanding: home insurance and the borrower’s lawyer’s trust ledger.

By 10am, home insurance comes in. Looks good. ✅

Two hours later, the trust ledger comes in. Looks… not so good. ❌

In reviewing the ledger, I see that more than 1/5th of the mortgage advance is being paid to a random person whose name I don’t recognize. 

So I call the borrower’s lawyer for more details. “Oh, that’s the wife’s sister, they’re borrowing money to sign the sister’s husband up for private golf lessons.”

Immediately my mind jumps to the scene in 𝑺𝒑𝒂𝒄𝒆𝒃𝒂𝒍𝒍𝒔 where Dark Helmet tells Lone Starr, “I am your father's brother's nephew's cousin's former roommate.”

“What’s that make us?” asks a confused Lone Starr.

“Absolutely nothing!” retorts Dark Helmet.

But jokes and Mel Brooks references aside, a payment to a third party only disclosed on the day of closing is a pretty bright red flag. 🚩🚩🚩

And even though private lending moves fast, there’s no substitute for careful review before the funds go out.