Renovo’s Paul Shaughnessy Sets Sights on Boston Area Growth
At Pacific Private Money, we strive to provide best-in-class alternative financing solutions for real estate transactions. Our team of experienced professional has built and earns a reputation for transparency, speed, and reliability.
Whether you are a self-employed borrower with a seasoning of funds and reserves issue, a real estate professional trying to provide their client with all the options available to them, or a mortgage broker who wants smart funding to achieve their client's goals, private money is a great tool that gives the borrower lending luxuries such as the ability to make cash-like o ers.
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“Don’t wait for extraordinary opportunities, seize common occasions and make them great.” – Orison Swett Marden
One month into 2023, and the road ahead for the industry is marred with uncertainty at best. The threat of a true recession weighs heavily across the nation and housing prices are continuing to decline in many markets. While many are struggling with the industry’s complete 180, there is opportunity still available for those who “seize the occasions and make them great”.
This month, we had the pleasure of working with Paul Shaughnessy, Managing Director, Renovo, for our cover story. Imbued with the Renovo tagline, #hustleharder, Paul and his team were tasked with building Renovo’s presence in Boston from scratch at the height of the pandemic. That was a lofty goal; however, Paul and his four-person team have since met and exceeded all expectations, completing 280 loans for over $215 million in his hometown in 2022. With Renovo’s presence in Boston continuing to grow, Paul has his sights set on additional markets surrounding the city while eying potential expansions outside Massachusetts as well. Known as one of the hardest-working leaders in the industry, there is no doubt Paul will continue to grow Renovo’s market share. Read this month’s cover story to learn more about Paul’s journey at Renovo.
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Unfortunately, while we have witnessed a positive rise in performance and market share ownership from our friends at Renovo, the real estate market has shown a huge uptick in people trying to take advantage of the market with unsavory practices across the country. Gain practical knowledge and tips to help you identify and prevent fraud, learn about the benefits of SelfDirected IRA’s, get helpful Marketing advice, gain insight into fund strategy, and get applicable advice about getting your money back from deficiency suits in this month’s edition.
There is no better time than now to set yourself up for success this year. #Innovate2023 is taking place April 17-18 at Balboa Bay Resort in Newport Beach. With sponsorships selling fast, reach out to our team to learn more. Visit www.geracicon.com for details.
Do you have an innovative company, service, team member, or idea you want to get in front of industry decision makers at Innovate 2023? We’d love for you to #shareyourstory with us. Contact us to find out how: submissions@originate.report. Limited space available.
Until next time,
The Renovo Financial story all started back in 2011 in a Chicago coffee shop by CoFounders Kevin Werner and Daniel Rosen—a fitting origin spot for the trendsetting, high-energy private money lender currently shaking up the lending space. The company was premised on a novel concept: staking a mutual investment in their clients’ long-term success by providing both efficient access to working capital and leveraging their collective decades of industry experience to offer actionable insights instead of merely tossing money their way and letting them either sink or swim like the competition was doing. Fueled by copious amounts of caffeine and an initial financial backing from Granite Creek Capital Partners, Kevin and Daniel steadily built a solid roster of all-star lenders and established a reputable track record of success in Chicago. Fast forward five or six years and Renovo has grown exponentially, with local lenders
actively fueling savvy investors in key markets spanning from coast to coast.
The Originate Report team recently had the privilege of sitting down with one of the most innovative professionals driving Renovo’s remarkable trajectory in a key market: Paul Shaughnessy, Managing Director of Renovo Financials’ Boston office. We had the unique opportunity to talk with one of the hardest working individuals in the lending sector to discuss his inspirational career development, the strategies and techniques he implemented to originate an insane volume of loans while maintaining next-level customer satisfaction and his take on current and future trends within the private lending sector.
Shaughnessy was born and raised in the Boston area. He had a stellar fouryear collegiate football career at a
small Division 3 program, Mount Ida College—becoming the only player in school history to rack up more than 1,000 yards rushing and 1,000 yards receiving in one calendar year. His success on the gridiron caught the eye of several professional scouts which led to an invitation to the NFL Super Regional Combine, and ultimately, stints in the Arena and Canadian Football Leagues. Shaughnessy was able to successfully translate his athletic success into the professional realm, exhibiting the same grit and determination he used on the field while mastering the ins and outs of the lending industry and becoming a prominent figure in the space.
After developing an interest in the financial services sector, Shaughnessy decided to relocate to San Diego in 2014, where he homed in on his finance skills. After picking up a real estate license in both California and Massachusetts, he was able to pivot to the private lending
industry, bringing with him a wealth of insights into how the funding process for investment purposes could be perfected.
But what truly sets Shaughnessy apart as a lending professional is his tremendous work ethic and dedication to facilitating the longterm success of his clients. “Paul is the kind of guy that will do twice as many loans as any of his competitors and still lose sleep on the one deal that got away,” notes James Gaskin, SVP of Corporate Development at Renovo. It is that level of commitment that allowed Shaughnessy to quickly establish himself as a respected figure in the private lending industry and garner a widespread reputation of going above and beyond to get deals across the finish line for his growing client base.
As he gained more experience in the industry, Shaughnessy began to
focus on the specific needs of real estate investors and developed a deep understanding of the unique challenges and opportunities in this market. He used this knowledge to create innovative lending solutions that helped his clients achieve their goals.
Despite his success, Shaughnessy never forgot his roots and remained committed to giving back to the community. This prompted him to move back to Boston and join Renovo Financial in 2020 after being impressed with the company’s energetic culture and impactful lending. Shaughnessy’s estimation of Renovo’s quality proved true during the COVID-19 era. “When the pandemic hit, capital markets shut down for the most part—but not Renovo,” notes Shaughnessy. “They were able to continue actively lending and honoring the initial commitments they made to their clients despite the industry being turned on its head seemingly overnight. The foresight to not overleverage themselves and secure key capital commitments from stable funds that had a vested interest in the long-term viability of the company speaks volumes to the quality of leadership here at Renovo and why it makes such a great organization to work for.”
But there’s a catch: Renovo had literally zero market presence in the Boston real estate lending market at the time. Shaughnessy was tasked
with building the business from the ground up in one of the most competitive markets in the country amidst the fallout of a global pandemic that had turned the entire industry on its head. Quite the challenge to say the least, but Shaughnessy was not intimidated—instead relying on his ability to quickly establish trust with key clients by genuinely investing in their success and putting in the needed effort to provide them with the requisite resources to accomplish their goals. “The one defining characteristic about Paul is that he truly cares about his clients,” observes Gaskin. “He’ll do whatever it takes to set them up for success, never using them as a means to an end which you see so often in the lending space—that means working around the clock seven days a week if need be. We have quite an impressive team at Renovo comprised of top-
level talent, but Paul sets himself apart even amongst these high achievers by his willingness to put in the work and commit everything to servicing his clients.”
The results Shaughnessy has generated to date certainly speak to his remarkable level of commitment. In his first year alone operating in Boston, Shaughnessy was able to generate $100 million in loan origination—a truly impressive feat considering Renovo had just opened up shop in the city and had yet to garner substantial brand awareness. Shaughnessy’s financial acumen and resourcefulness enabled him to gain the trust of his clients, and his innate ability to maintain unparalleled customer service despite a constantly escalating amount of loan servicing volume translated into a highly loyal client base. His track record of
producing above-average results via a truly client-centered, transparent lending philosophy resulted in Shaughnessy more than doubling his origination volume the following year, closing over 280 loans for $215 million+ in his hometown in 2022.
This is no small feat for an area boasting some of the oldest neighborhoods in the United States. “Real Estate transactions in Boston lend themselves to incredibly complex deals due to strict zoning, commercial to residential conversions, and other unique situations found in the dense and older neighborhoods in the surrounding area,” explained Shaughnessy. “Our success over the last year would not have been possible without the grit and innate desire to succeed in this competitive
market found in our four-person team. Our Senior Production Assistant Brianna DiZeo; Portfolio Manager, Evan Kritz; and Senior Loan Closer, Graciela Calvo round out one of the most dedicated teams I have had the privilege to work with during my career.”
Having a chance to make a positive impact in the Massachusetts neighborhoods he grew up in is something Shaughnessy truly relishes in his role as Managing Director. “The most rewarding aspect of my job at Renovo is the unique opportunity to change the Boston area communities that I grew up in like Malden, East Boston, and Chelsea for the better,” observes Shaughnessy. “I take pride in providing much-needed capital
to develop and improve the quality of life for those that live and work here.”
Boston-based Renovo clients are certainly benefiting from the purpose-driven energy Shaughnessy brings to the office day in and day out. After building the Renovo operations in the city, Shaughnessy continues to refine and improve his protocol to consistently deliver a better end-product to borrowers and intends to expand his market share deeper into Boston.
While Boston is home and will remain central to his core business, Shaughnessy has his sights set on conquering additional markets.
“Renovo has a reputation for a streamlined process for both shortand long-term loans which make our firm uniquely suited to tackle markets across the US,” notes Shaughnessy. “My intentions are to expand beyond the Boston area into additional markets outside the state that are posed for a lender like Renovo.”
Drawing from his years of diverse experience in both the real estate and finance worlds, Shaughnessy is able to provide real value to his clients. “I enjoy the capital markets side of the business,” notes Shaughnessy. “This involves originating loans and then trading them to the secondary market, which I have developed a thorough understanding of how the major players in this space evaluate risk and credit—allowing me to vet loans and ultimately enhance their
overall credit.” Leveraging his years of industry experience to discern emergent trends and quickly adjust lending practices to accommodate shifting dynamics, the insights Shaughnessy is able to provide to his clients are almost as valuable as the actual capital he provides for them.
The future is an admittedly challenging thing to predict considering the recent market volatility and constantly fluctuating dynamics. However, Shaughnessy is optimistic that he can continue building on the $450 million in lending volume he has logged since 2018. “We will have to keep an eye on unemployment and inflation in the future,” observes Shaughnessy. “I always communicate to clients that it pays to be forwardthinking and help them develop realistic exit strategies that align with their investment strategy— crafting a truly diversified asset
portfolio that both mitigates risk and optimizes cash flow for each and every client is my goal here at Renovo. My top priority is to ensure that investors are set up for longterm success.”
There is more to achieving that goal than meets the eye. The real estate industry is in a constant state of flux and keeping on top of the constantly evolving marketplace dynamics is almost a full-time job in and of itself. Despite his understandably hectic schedule, Shaughnessy still finds the time to conduct in-depth market analytics so he can provide the best information to his clients that will position them favorably for the future. “I leverage data insights and market analytics to provide actionable insights to clients and strive to be the best partner I can be to them—make sure they know that there is a mutual commitment to the achievement of their financial objectives,” notes Shaughnessy.
It is just one of the many practices that makes Shaughnessy a trendsetter in the lending industry and offers a glimpse of the level of professionalism and preparation he brings to Renovo’s clients—inspiring confidence that no matter what the future holds, they will be able to count on Shaughnessy to help them achieve success.
For more information, please visit: https://renovofinancial.com/
By John Bowens, Equity Trust Company
Gary’s self-directed investments are fueling local real estate and his family’s financial future. His only regret: not starting sooner.
“After three or four transactions where the buyer or seller was utilizing an IRA custodian, it finally hit me…it is time for me to look further into it,” Gary says.
It took 30 years of working in the real estate industry for Gary to finally “wake up and smell the coffee.”
Gary, a real estate attorney in New York, regularly encounters clients who are using self-directed IRAs to receive tax-advantaged real estate returns. It wasn’t until recently that he stopped and took notice.
Though Gary has hands-on experience as a real estate attorney and investor, his self-directed IRA investing has allowed him to go in a new direction.
“I sold many properties taking back owner-financing, but I did not give private hard-money loans, so using
a self-directed IRA was the perfect “My wife’s and my Roth IRAs are not large enough where we could invest these funds to buy a property; however, we could partner up on a fix and flip if we wanted to.”
Gary decided that holding private notes and mortgages would be a fitting strategy for his Roth IRA. His funds enable borrowers to invest in additional real estate projects, providing a benefit to the community as well as his retirement account through interest earned.
He learned of an investor who was buying a property on a land contract and needed $140,000 to pay it off. He did not want to go to a traditional bank due to timing and the upfront costs the lender required. The borrower backed the loan with a four-family apartment worth approximately $200,000 as collateral.
Gary sourced the funds from three different accounts: his wife’s Roth IRA, his Roth IRA, and the balance from his LLC. He submitted a request
to have the appropriate proportion of funds sent from the accounts to the borrower.
“The procedure to have the note approved was fast and seamless, and to date everything has worked out very well,” Gary says.
He allocated percentages to each lender so that the borrower makes out three checks per month instead of one. For the portions that came from the Roth IRAs, the monthly income is then deposited directly
into those accounts, per IRS rules. He does not require any appraisal or title insurance since he can review the property history himself as a real estate attorney. He also does not charge points or any prepayment penalty that many other lenders charge.
The terms of the loan are 14-percent interest-only payments, no prepayment penalty, and it included a call (lender can ask for repayment of the loan after five years).
“I have noticed that many borrowers will pay a bit higher interest for the ease of borrowing with our terms,” Gary says.
While Gary’s expertise in the real estate field has helped him quickly grasp the concept of real estate note investing in an IRA, he points out that he never uses his knowledge and contacts to improperly benefit his personal investments or savings.
“A no-brainer”
Investing in real estate in his community through private lending brings Gary personal benefits he doesn’t believe he’d achieve with other types of investments.
“I am currently averse to the stock market, so I am generating minimal returns in money market funds – a far cry from the 10-14 percent I can generate by note and mortgage funding.”
Gary’s only regret is that it took him this long to jump on board with selfdirected note investing.
“I should have started much earlier using alternative Roth IRA
investments,” Gary says, adding, “In the near future, I intend to move my 401(k) and my wife’s 403(b) to Equity Trust Company so we can fund larger transactions. To me, it is truly a no-brainer.”
Gary’s goal is to continue with this strategy, creating generational wealth so his family can continue to benefit from similar investments long down the road.
“The beauty of notes and mortgages is that the majority of the payment, especially in the early years, is mostly interest so that the principal goes down rather slowly,” he says. “This means that you can lend for decades. I have children and grandchildren who will certainly benefit from this wise investment. It is time for me to discuss with my children putting their toes in the water as well.”
Gary’s advice to anyone who has not yet begun self-directed investing is to “wake up and smell the coffee,” like he did. He adds, “Where else can
you earn a great rate of return and –if you utilize your Roth IRA – receive tax-free interest? The stock market has its place (in a portfolio), but so do notes and mortgages.”
“As with other types of investments, private lending carries risk, so doing your due diligence is also important,” he adds.
Case studies are provided for illustrative purposes only. Past performance is not indicative of future results. Investing involves risk including possible loss of principal. Information included in the above case study was provided by the investor and included with permission. Equity Trust Company does not independently verify all information provided by third parties.
Equity Trust Company is a directed custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional.
John Bowens Director Head of Education and Client Success Equity Trust Companyhttps://www.trustetc.com/
He does not require any appraisal or title insurance since he can review the property history himself as a real estate attorney. He also does not charge points or any prepayment penalty that many other lenders charge.
Q: Why did you choose Private Lending?
It was not a conscious decision. It was something I fell into. In 2008, someone I knew from a former job approached me and asked if I wanted to start a lending business with him. It was when mortgage companies were closing, and real estate prices were unstable. The job I had at the time was winding down, so without a plan on where I was going next, I accepted his invitation. We formed Rehab Financial Group LP, and the rest is history.
Q: What is your current role and what do you do day to day?
I am the Managing Member of Rehab Financial Group LP, which means that I have my hand in all aspects of running the company and do whatever needs to be done to keep the business moving forward. I approve all new policies and procedures, supervise preparation and adherence to budgets, approve all capital expenses, and manage communications with investors, including capital raising.
I also participate in hiring and training employees and office related tasks such as shredding and cleaning.
Q: What excites you about your role today?
The growth of the company and the advancement of employees within it. We have several employees that have been with RFG several years and have excelled in their job performance. Nothing excites me more than seeing people grow and realize their own dreams of being able to provide for themselves and their families.
around the office speaking loudly. It did not matter if you were a senior officer or a lower- level employee. He was obnoxious, abusive, overbearing, and entitled. I knew how the rest of the staff viewed him – which explained the tremendous employee turnover within the company. Ultimately, the company failed. I learned from him how not to treat employees and the value gained by respecting EVERYONE that works in the office. I try every day to be that sort of leader. I try to make sure that the RFG employees know that I value them and respect them for their hard work and contributions.
Q: Is there anything that you wish you could go back and tell yourself at the beginning of your career?
I would love to go back and tell myself to relax. All the energy I wasted on stress was not worth it. The best way to manage a problem is to attack it, look for solutions, and work toward resolution. In the early days of my career, I was unable to put these events into perspective and let them overwhelm me. It is not that I do not currently have stress in my life. It is that I can put it in its place.
Q: Who is someone that has had a significant effect on your career and why?
Q: Can you explain a time where you faced adversity or had struggles early on in your career?
Where did it all begin? How did these experiences mold and shape you into the leader you are today? I had a boss that was the CEO of a company. He was the most selfish person I ever met. He had no respect for any of the employees and was constantly on his headset walking
As cliché as it might sound, it is my father. I grew up in a very traditional home – dad was a doctor who worked long hours while my college-educated mom stayed home and raised the children. In adulthood, I realize that this was a choice they made together. Although traditional, my father saw the world in realistic terms and raised his
two daughters in the same way he raised his son. He wanted us to be independent women who would never need to rely on a man to support us. He encouraged me to go the best college I could, regardless of cost. When I decided to go to law school after working in retailing for ten years, he paid my tuition, which made that possible.
Q: What has been your favorite aspect of being in private lending over the years?
The best part has been seeing the growth in the industry and the growing diversity of private lenders. When I started RFG, my first AAPL meeting was a sea of white men. Over the years, I have seen an influx of women and people of color, which makes the industry stronger.
Q: What would you consider to be the highlight of your career thus far?
The best part of my private lending career is the opportunity to see my company grow from three employees to over thirty. I have two sons, and RFG is my third child! I am as proud of RFG as I am of my two young men.
Q: What do you enjoy most about your job? Least?
I love when I help people realize their dreams through doing projects with RFG. We have many customers who are immigrants or people from disadvantaged beginnings and start with one project and then expand to many. These people are hardworking and frequently do rehab projects in addition to their full-time jobs. Seeing them live the American dream and build generational wealth is a wonderful
thing to be part of. My least favorite part is when people disappoint me and having to deal with that. Whether it is employee malfeasance or customers who do not pay, dealing with the fallout is generally unpleasant.
Q: Is time or money more valuable and why?
If you had asked my when I was younger, I would have said that money was more valuable, as I perceived that time was unlimited. Now, I know that time is so much more valuable. Money can be replenished, but time cannot be regained. There is way too much to see and do in this world to waste any time!
Q: How do you make sure your company stays ahead in this industry? At RFG, we are constantly monitoring what our competition is doing, reading financial and real-estate related news, and talking to our customers. We periodically assess our product offerings along with our policies and procedures to make sure that we stay ahead of the curve and our competition.
Q: What tools do you use to aid you in your role to be most efficient, organized, and focused?
I am a big believer in calendar control. Every day on my calendar is full of the things that I need to get done on that day. As each item gets finished, I mark it as done. If the day gets away from me, I review the remaining tasks for the day and decide what I need to finish that day and what I can move to a subsequent day. I never end a day without completing everything on my calendar or assigning it to another day. There is almost no task too small to get added to the calendar, so I do not lose track.
Q: Has your role changed significantly to address the current environment? As RFG has grown, I have had to take a role in handling large issues and delegating management of smaller issues to members of the RFG management team. It has taken some time and considerable effort for me to be able to do this, but this transition has taken place. Given the current instability in the capital markets, I have become stricter on expenses and where RFG spends money. Previously, I might have been more willing to experiment with different ideas, but I believe the current climate calls for conservation of capital and going back to basics for the time being.
Q: What advice would you give to someone who has just started out in private lending?
Do your homework. This is a difficult business, and it is necessary to know the fundamentals. I would also emphasize the importance of being an honest actor – this is a fairly small industry that is not kind to the scammers of the world who give us all a bad name.
Q: How will private lending change to adapt to the current market trends? Private lending will continue to contract in many ways in the current market. We have already seen many of our peer companies go out of business due to the limitations on loan sales by Wall Street buyers. The lenders left will continue to modify their requirements and underwriting to insulate against riskier loans. Only those that lend very conservatively and have good access to cash are likely to survive the next 12 – 18 months.
For more information, please visit: https://rehabfinancial.com/
Brock VandenBerg founded TaliMar Financial in 2008
after recognizing a unique opportunity to provide much-needed capital to real estate investors purchasing distressed single family and multi-family properties. Their ability quickly fund hard money loans in the Southern California market set TaliMar Financial apart and garnered the lender a reputation as a go-to source for hard money financing.
TaliMar Financials’ rise did not happen overnight. It is the product of VandenBerg’s decades of experience in the real estate and finance
industry, which included roles with KeyBank’s Private Equity Group and the Federal Deposit Insurance Corporation (FDIC).
While at the FDIC, VandenBerg identified common mistakes that plagued financial institutions leading up to and during the financial crisis. This helped him develop the strategies he employs today in underwriting and servicing his loan portfolio. According to VandenBerg, “The FDIC gave me incredible insight into the troubled loan portfolios many local and regional banks had at the time of the financial crisis. The
time spent managing the workouts on these loans allowed me to better understand the mistakes that were made when the loans were approved and then serviced.”
Originate Report had the distinct privilege of sitting down with VandenBerg to discuss the launch of their mortgage fund, TaliMar Income Fund I (“TIF I”), and their strategy in today’s volatile market.
The Genesis of TaliMar Financial TaliMar Financial is a hard money lender headquartered in San Diego, CA. Since its founding in 2008,
TaliMar Financial has successfully funded more than 800 loans totaling over $345 million. TaliMar Financial currently services an active loan portfolio of more than $55 million secured on single family, multifamily, and commercial properties in the Southern California market.
Since its inception, TaliMar Financial has focused on developing and refining technology to allow borrowers to quickly obtain funding for their fix and flip, fix and hold, bridge, and new construction loan requests. According to VandenBerg, “We understand the loan approval process can be stressful, so we have focused on developing a seamless process from loan submittal through funding. I think our Borrowers have grown to appreciate the ease of working with TaliMar.”
The growth of TaliMar’s origination platform and need to identify a more efficient process to fund and service their growing portfolio was one of the driving factors behind VandenBerg’s decision to launch TaliMar Income Fund I. VandenBerg notes, “By early 2018, we were funding 12 to 15 loans per month and matching each loan with a single or multiple investors was becoming very cumbersome. Our portfolio had grown to over 100 loans with over 350 individual investors. It was becoming too complex even with the proprietary software we had developed. I was starting to get concerned that we couldn’t maintain
the level of service our investors and borrowers had grown to expect from TaliMar.”
Initially, TaliMar Financial launched an industry leading online lender portal that allowed investors to view and subscribe to individual trust deeds. The portal solved a huge bottleneck which was the back-and-forth e-mails of loan summaries, underwriting material, disclosures, etc.
Soon the portal became extremely popular, as it streamlined the process of investing in trust deeds. But as the portal improved, the number of users grew and the ability to match trust deeds with loans again became too cumbersome. “Trust deeds would get funded in minutes and I was spending more time explaining to investors why they missed out on an investment than actually originating new trust deed opportunities. It really started to affect the efficiency of the business,” VandenBerg explained.
Enter TaliMar Income Fund I (TIF I)—a verifiable game-changer for both the investor and borrower that TaliMar Financial serviced. TIF I mirrored the same underwriting and servicing guidelines that VandenBerg and his team developed over the prior 12 years but provided investors a much more consistent approach to investing in trust deeds. It also gave borrowers and the brokers that
brought loans to TaliMar Financial, more assurance their loans would be funded in a timely manner.
Mr. VandenBerg explains, “We were able to reduce the time to underwrite and fund a loan from an average of 7 days to less than 5 days by eliminating the entire investor matchmaking process. Additionally, we reduced the cost of funding a loan by over 50% by eliminating the investor back and forth communication, disclosure requirements, and other costs associated with working with individual investors on each loan. At the end of the day, it allowed us to focus on what we did best which was to originate good loans.”
The fund provides investors a consistent and reliable source of monthly income secured on real estate—all while offering the numerous tax benefits of a Real Estate Investment Trust (REIT). “TIF I essentially pools investor capital into a single fund versus matching investors to each loan,” explains VandenBerg. “This allows them to earn monthly distributions, but they can also invest at any time—providing an unprecedented level of flexibility when it comes to investing.”
One of the biggest concerns that VandenBerg had when he launched the fund was its adoption by the investor base he had cultivated for over a decade. VandenBerg explained, “The biggest concern that I had when I
TaliMar Financial: Continues on pg. 22
TaliMar Financial: Continued from pg. 21
launched the fund was that investors were not going to transition over to the fund. I mean, why change something that was working.” But his concerns were quickly calmed as over 60% of his investor capital moved over to the mortgage fund, with much of the remaining investors expected to transition over as their current investments pay off.
The biggest advantage for trust deed investors is that they don’t miss out on investment opportunities when invested in the fund. “I think the biggest draw to the mortgage fund was that it eliminated the uncertainty when a trust deed paid off; investors aren’t having to scramble for another investment and risk losing income while their capital sits idle. Also, investors were getting tired of tracking a portfolio of individual trust deeds,” VandenBerg maintains.
TIF I brought a number of other benefits to investors. “With the
guidance of Kevin Kim at Geraci LLP, we decided to structure the fund as a Real Estate Investment Trust which made our investors eligible for the Qualified Business Income (QBI) tax deduction. That means only 80% of income is taxable—the other 20% is not taxed, which has a very positive impact on investor returns.”
The benefits don’t end there. TIF I mitigates risk by diversifying investor capital over a portfolio of loans. That means if one trust deed is late or pays off, it doesn’t
heavily impact the overall monthly income of the investor. The fund also offers a lower investment minimum when compared with a trust deed investment and isn’t subject to unrelated debt financed income (UDFI) for investors using their retirement funds.
All in all, TaliMar Income Fund I is proving to be a major success for TaliMar Financial and its borrowers and investors. TIF I will allow VandenBerg and his team to scale without the costly overhead required when managing a portfolio of trust deed investments. And with a seasoned industry professional like VandenBerg at the controls, the future is looking bright for TaliMar Financial as the private lending environment continues to evolve. For more information, please visit: https://www.talimarfinancial.com/
All lenders need to know that there is no such thing as preventing fraud or being fraud-proof. If you think you are fraud-proof, this opens you up to careless behavior and more fraud. What you should focus on is thinking about resisting fraud, and thereby remaining vigilant against it.
All discussions about fraud should begin with understanding exactly what it is and what it is not.
There are four elements that must occur for the act or omission to be a fraud:
1. The fraudster must have made a false representation to the victim, and made that representation as if it were a statement of fact.
2. The false representation must have been known to the fraudster to be untrue at the time of the representation.
3. The fraudster made the representation for the purpose of inducing the victim to rely or act upon that representation.
4. The victim did rely or act upon that representation and did so to their detriment.
Additionally, the false representation need not be an overt statement or action. A fraudster may also make a false representation by omission, that is, staying quiet or leaving something out when they should have made an actual representation.
Fraud is, in short, a false statement (or lack thereof) passed off as fact, known to be untrue, to get the victim to rely upon it, which they did, and suffered damages as a result.
Now that we understand what a fraud is in theory, we will dive into some examples of fraud in our industry.
Asset rentals are when cash or other assets are temporarily placed in the borrower’s account to qualify for the mortgage loan. These assets are not really owned or controlled by the borrower but by another individual or entity that lets the borrower use those assets to make the appearance of a large asset pool.
This is a fraud because the borrower represents to the lender that the money in the account is owned and
controlled by them and done to induce the lender into thinking the borrower has more cash on hand than they really do.
Looking for a longer history of bank statements and identifying large, out of place, or context deposits, as well as comparing it with income from tax returns and asking follow up questions to the borrower about where the money came from, can help catch this fraud.
When a Borrower who makes fake, fictitious, or forged documents (potentially including others in the scheme) to meet the Loan to Value (LTV) requirements, this constitutes a fake down payment.
Other than doing your best to spot suspicious documentation and follow up on them, this fraud should not make it through the closing since the title agent or escrow company should confirm that the actual down payment funds are already accounted for and held for the closing.
Ensure proper follow-up communication with the closing agent,
whomever or whatever it may be, to confirm their receipt of the buyer/ borrower’s down payment.
Fraudulent appraisals may occur when borrowers team up with an appraiser who also commits fraud by falsifying information or intentionally providing inaccurate information in the appraisal.
It is a best practice for a lender to order its own appraisal through a trusted appraisal management company. It is also wise to have your own in-house appraiser or other person trained to review appraisals and raise red flags if issues are found.
Any use of forged, falsified, or incomplete documents intended to mislead is considered fraudulent documentation.
Experience is really the only way to develop a healthy and more accurate filter for fraudulent documents. When using inexperienced staff, have multiple layers of review, and instruct them to be overly suspicious and slow down. As always, follow up with a borrower or other provider of the suspicious document to ask questions.
Examples include:
• Fuzzy/out of focus text
• Mismatched size or font of text in certain areas or throughout
• Conflicting dates, names, and terms
Powers of Attorney witness requirements differ from state to state, but
generally the more witnesses the better. Always insist upon confirming the validity of Agent’s authority with the Principal directly.
Then, check to see how broad the authority is because a limited POA specific to the property in question is likely more legitimate than a broad, loosely defined Power.
Finally, always make sure to ask questions such as, why is the POA necessary? Typically, POAs are for those who are physically or mentally incapacitated. Otherwise, operational control of a company can and should be done by resolution.
And, never forget that with all forgery, you need to check for similar signature styles.
Shell companies are used to disguise and hide the true nature of ownership, control, and location of assets. They generally show a fictitiously long business existence (buying an older shell company with an established “history”).
In this example, the borrower will typically have mysterious transactions in the sale or acquisition of the company or equity interest, or a multi-layered ownership by other entities rather than natural persons.
The best one can do here is to ask questions and for more documentation. If you cannot piece together its history, chain of command, or ownership, there may be a problem.
Equity skimming/stripping consists of inflating appraisal and/or selling price to get a bigger loan and more cash than the property is worth. This includes inflating sales price through multiple prior transactions between entities, all controlled by the same individual(s) for increasing value, creating a false sales history with an inflated price to get a larger loan.
A best practice is to check county records for the recent sales transactions and who was involved. You can also usually check with the secretary of state for the ownership information of the companies you see in the transaction history. You may not wish to investigate all 50 states, but the company is usually in the state the property is in or a handful of other states, such as Delaware, Wyoming, or Nevada. If successive companies have the same or related owners, that is a red flag.
When an individual with a stronger or preferable financial background is the borrower, even though this individual has barely any connection and control of the loan, proceeds, or project, this is known as a straw or nominee borrower. They may be removed or replaced quickly and at will and are sometimes paid for their services.
Ask the borrower details about the loan transaction. Be sure the person with the better financial background is at least one of the individuals
signing a personal guaranty. If they are not willing to make a guaranty, that should raise a red flag.
A borrower can fake a multitude of information and documents to make the property seem income-producing from rentals, such as:
• Occupancy rate
• Current occupancy status
• Future occupancy status
• Lease terms or leases themselves
• Existence or non-existence of Landlord – Tenant disputes
An appraiser or another 3rd party inspector could confirm occupancy and lease terms and even speak with tenants to better understand the conditions. As always, be suspicious.
In this scenario, a fraudster will have hacked into either a wire-recipient’s or wire-sender’s email to monitor a conversation regarding a potential wire transfer. Upon sending the recipient’s wire instructions, the fraudster will hijack that email, change the wire instructions to reflect their own account information, and then send the email to the wiresender so they will pay the fraudster instead via the use of new/alternate wire instructions.
Most of the time, the wire instructions are altered only in the details
of the account, and not the rest of the document or email to seem legitimate. Occasionally, though, the fraudster will send additional information indicating that the wire instructions did indeed change but that this is normal. Sometimes, the fraudster will also change the contact information so that if a wire-sender were to call to verify, they would call the fraudster, who would verify only the fraudulent instructions.
To mitigate this risk, always confirm wire instructions by phone. Only call the number you received when you first had a relationship with the title company; not the number you were given at the end, as this may have been intentionally changed. Ask to speak with the specific person you have been corresponding with, not just anyone who picks up the phone. Ensure you get confirmation in writing that wire was sent (and get copy of Fed Reference Number), to be confirmed again later in writing when received.
This fraud is typically not done in a vacuum, and they are most likely working with the borrower on the scheme. If the title company is acting too friendly, respectful, submissive, or complaisant to the borrower’s requests, treat this with suspicion, especially if this is the first time working with either of them. However, Title companies are not immune to fraud by a 3rd party fraudster.
You should note that nowhere in the suggestions for any of these scenarios did it say, “this will prevent the fraud”. These suggestions can only help catch some fraud or can help resist fraud. These are but a small sample of types of fraud common in our industry, and every instance has its own complicated facts, so tread carefully.
In this industry, as in others, there will always be an element of reliance upon others and their representations. If a document or a story sounds fishy or too good to be true, it very well may be. Always ask questions. The more a fraudster is required to lie, the more likely they will make a mistake, and the truth will come out. We can only do our best to resist fraud. It is up to you to put up the fight.
Geraci’s Banking and Finance attorneys have many years of experience reviewing loan files and detecting red flags for fraud. We are available to review whole loan files, a subset of documents, or generally for questions on any type of fraud issue. Please reach out with any concerns or questions.
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Capital raising is a constant grind for many private mortgage originators (“Lenders”). Whether they target mortgage investors for individual trust deeds or a mortgage fund, many tell me the most challenging part of the process is generating investor leads. After the initial contact, it’s just a matter of building a relationship with the investor until they are ready to deploy their capital.
While lenders still need to work hard to seek new mortgage investors, it could be so much easier if it were the other way around. Many investors search online to find companies to invest with, but most lenders do a poor job presenting their investment offering to the public. Here are a few
options for generating “inbound” investor leads with a low budget.
I have seen so many lender websites with one basic page for capital raising. While it’s relatively easy to add one “invest” page to your existing website, I recommend building a separate website to focus on the investment offering. Keep your primary site focused on loan origination. Simply add a link to the new investment website, which should have a separate domain name — XYZlending.com for origination and XYZmortgagefund. com (or XYZtrustdeed.com) for capital raising.
It's more impactful to direct potential mortgage investors to a website
where they are not distracted by content that is not relevant to their needs. The site doesn’t have to be too elaborate, but I recommend including the following pages or sections:
Tell investors what’s in it for them. What’s the average return? What’s the risk profile? Do you service the loans in-house or outsource? What happens if a loan defaults?
Tell investors about the types of loans their money will be funding: geographic areas, LTV, LTC, credit requirements, etc. Be transparent about the origination fee you charge to borrowers, even if your investors don’t get any of it.
Brag about all the loans you’ve originated in the past and the overall performance. Disclose how many loans have defaulted. List every single loan you’ve ever closed with the following details: city/ state, property type, loan type, loan amount, LTV, funding date. If you don’t have photos, a list format will be sufficient.
Whether you’re raising capital for a fund or individual deals, the mortgage investor needs to know you and trust you. Talk about the company’s history, accomplishments, the team, company culture, and show photos of everyone in the company. Show
pictures of your office and encourage investors to visit.
Ask existing clients to write up a testimonial about their experience investing with you. Get five at the very least to start, and 15-20 would be a good target. Get more testimonials from newer investors after they’ve invested for some time.
it could also apply to originators who broker loans and retain the servicing.
Design a pitch deck with all the same information included on your investment website. Offer to send it to potential mortgage investors if they fill out a short form on the website.
Produce high-quality videos to promote the investment opportunity. The company principal(s) should be talking to the camera; don’t even think about making an animated cartoon video. A quality video will give your company credibility and help build trust before, or without, meeting in person. These videos should live on YouTube, optimized for searches.
List your company on websites that offer a platform to promote mortgage investment opportunities. These sites typically already have an investor audience and good SEO for inbound traffic, which you can leverage.
I recommend publishing your quarterly or annual reports to offer full transparency about your portfolio’s performance. The reports are a great marketing piece that may help attract new investors. This suggestion mainly applies to fund managers, but
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The REO is sold, and a balance remains. You find yourself a “sold out junior”, or the REO didn’t gather the full balance owed on your loan, so the collateral is exhausted, but amounts remain unpaid. This is your “deficiency balance”. You’ve negotiated with the borrower for a payment plan, or
a lump sum. You’ve sent a “demand letter”, and the money has not come through.
Electing to pursue the borrower for a deficiency judgment, a complaint in the Superior Court for breach of contract (and common counts) is in
order. This requires most of the same accomplishments of any lawsuit; viz filing the complaint with the Court, serving the customer, and obtaining a judgment.
Why bother? Each of these events present an opportunity (trigger) for your borrower to contact you
and arrange payments. He may get informal notice of the lawsuit, and then know you are serious. When the process server comes to his home or office and hands him a summons, he will know it is serious. When a judgment is entered, you have plenty more leverage to wield.
What is the point of all this? There are several good answers. You lose the right to enforce your written contract four years after default (the statute of limitations). Given you can’t wait forever, it might as well be undertaken now so you can get to your collection remedies (more on this later). Also, they are not paying you voluntarily, so the trigger events (above) might get their attention (and more importantly, get your money). Finally, the documents, evidence, and recollection you have about this case is fresher/better now. It won’t age well. Your testimony won’t be superior in three years to what it is now. Also, your customer may disappear with his resources between now and then. Much better to tag him now while you can find him and he still has some money.
If your customer doesn’t respond to the lawsuit, it will go quickly (90120 days) and not cost very much. You can then embark on collection.
If they do respond, it might be considered good news. They are likely protecting something and have the resources to defend. You should still win; it will just
take a bit longer. So long as your contract was properly formed and executed, you have an accurate account payment history, and there were no significant mistakes in the collection and foreclosure process, you should be entitled to a judgment for the full amount owed (deficiency balance), plus attorney’s fees, costs and interest (so long as the default provision of your contract provides for them).
The lawsuit for your deficiency has the informal effects (above) which may bring your customer (and his checkbook) to you. If not, now that you have a judgment, you are clothed in great power to get your money without his consent. You’ll notify him of the judgment (Notice of Entry), record abstracts (which automatically affix to all his real estate – even future acquired real estate – for ten years, thus making you a secured creditor again), levy his bank accounts, garnish his wages, take his deposition and force him to identify his assets for you.
Abstract of Judgment: These are simple two-page forms. Other than your judgment, you’ll want the social security number or your borrower’s driver’s license number. Record these in every county where you think the borrower has, (or might have in the future), an interest in real estate. The abstract stays of record for ten years. These will cost less than $100 to create, and about $50 to record. For ten years, if ever your borrower wants to buy, sell, or refinance real estate in the county where the
abstract is recorded, he MUST pay you before his transaction will close. You need not do anything other than wait for a call from escrow. They will ask for a demand, which you will send, and you’ll be paid. This is the best kind of fishing there is. The borrower will have long forgotten about you, but the County Recorder and Title companies will have not. (How mad is his wife going to be when they now can’t sell their house, or buy their dream home?) You’ve built a great deal of leverage. The lien automatically encumbers all real estate in the county where recorded, the very moment it is recorded. You need do nothing else. California has 58 counties. Pick whichever you like (or all of them, there is no limit).
Bank Levy: These used to be difficult. To collect, you’d need to know the actual branch of which bank your borrower used. Now, banking is (mostly) centralized and there aren’t nearly so many banks used. The court will issue a writ of execution, which you’ll send to the sheriff with an instruction letter. The process is rather intricate but shouldn’t cost more than $1,000. The sheriff then serves the writ to the bank which then searches for account (and even safe deposit boxes) where your borrower has an interest. If there is any money in it, you get it all! The sheriff will collect it, hold it for a few weeks (while the borrower gets to file with the court “claims of exemption” – reasons he should get to keep some of the
money), then you get it all. Don’t expect this to work more than once. Even dimwitted judgment debtors will close their accounts and move to another bank. However, nothing prevents you from getting multiple writs all at once. We recommend getting five and serving each of the five largest banks in CA at the same time. We estimate that will hit 80% of banking customers in the state. Individual accounts, joint accounts, trust accounts … doesn’t matter. If your judgment debtor’s name is one of those on the account, you get it all. If he has a Rolex in the safe deposit box, you get it.
Wage Garnishment: For this one, you’ll need to know where the borrower works. Prime targets are government workers (DMV, teacher, CalTrans, police department). Folks make careers there and tend not to leave with the frequency employees do in the private sector. Much like the bank levy, you’ll get a writ of execution which the sheriff will take to the borrower’s employer. Henceforth, you’ll get 20% of the borrower’s take home pay until the
judgment is paid in full (including interest and collection costs). You can expect a check from the sheriff every month until the debt is paid, or the borrower quits his job in protest.
option is more costly (you are paying for your attorney’s time, as well as the court reporter for a transcript).
Judgment
For the above options, you don’t need to know where your borrower is. It doesn’t matter. For this one, it does. You need to have a process server actually touch him with the papers. Subservice isn’t any good. You need to actually serve the borrower. A JDE is very similar to a deposition (which is taken during the litigation). The difference is a JDE comes with a Court Order to appear. If your borrower doesn’t appear for the JDE, the Court will issue a Bench Warrant. Mind you, law enforcement doesn’t actively seek these out for enforcement, but some evening when your borrower is driving home from a nice dinner out and runs a stop sign – he is going to jail. The warrant will appear for law enforcement just the same as if he skipped bail on his murder charges. The JDE is typically taken at the courthouse. A reporter is not required but is recommended. This
Each of these remedies may lead to funds for you to use in satisfying your judgment. Even if they don’t, you are putting pressure on your borrower. At some point, hopefully it will be easier for your borrower to pay you than it is for your borrower to play cat and mouse with you. Then you’ve won.
Your borrower is administered and oath and is required to identify assets which you can use to satisfy your judgment. Ask where he works, and banks (garnish and levy). Find out where he owns real estate (abstracts). Brokerage accounts? That is a nice-looking ring, what is it worth? How old are your parents? Are you in their will?
Each of these remedies may lead to funds for you to use in satisfying your judgment. Even if they don’t, you are putting pressure on your borrower. At some point, hopefully it will be easier for your borrower to pay you than it is for your borrower to play cat and mouse with you. Then you’ve won.
Always remember, the fees and costs you incur are all added to the balance owed. Ultimately, your borrower is paying your collection costs.
Having trouble with a borrower? Geraci Law Firm can help with legal remedies to recover your funds. Contact us today.
https://geracilawfirm.com/
MERIDIAN, Idaho, Dec. 15, 2022 /PRNewswire/ -- Sekady Capital, LLC, a provider of secure payment solutions and project management software for the construction industry, successfully completed an audit process and received its Service Organizational Control (SOC) 2 compliance certification. This milestone certifies that Sekady maintains and conforms to a globally recognized standard in its storage and handling of sensitive client information. Visit Sekady to learn more about how Sekady is optimizing the construction lifecycle.
"Cybersecurity is paramount in money movement, and in real estate and construction payments. With that in mind, memorializing our controls and security protocols with SOC 2 was a clear step for us." shared Thayne Boren, President at Sekady. "We believe in safeguarding our customers and staying vigilant with their confidential information. This is not just a one-time event but rather a continuous effort for our organization."
This certification ensures:
• Standards for trust principles including security, availability, processing integrity, confidentiality, and privacy are set and maintained
• Trust principles are successfully adhered to
• Regular system penetration testing is performed
The SOC 2 audit was administered by Eide Bailly, LLP, and adhered to the American Institute of Certified Public Accountants (AICPA) guidelines.
The auditing process consisted of thorough examination of Sekady's policies, procedures, and systems under the Trust Services Criteria. With this audit and certification, Sekady ensures that customer data is protected and managed with the highest level of security and privacy, in addition to current bank-grade encryption standards.
About Sekady: Sekady provides secure construction payments software to valued partners such as Title Companies, Fund Control Companies, Lenders, General Contractors, and Subcontractors while offering seamless collaboration and visibility into their construction projects.
Pleasant Hill, California, January 4, 2023—Spiegel Accountancy Corp. announced today that the firm promoted Audit Director, Kadidia Traore, to Principal effective January 1, 2023. Traore joined Spiegel’s audit management team in 2016, and specializes in working with mortgage bankers, private equity lenders, and employee benefit plans.
Traore received her M.S. in Accounting from the University of Virginia shortly after completing her B.S in Business Administration from University of California, Berkeley, and has been a Certified Public Accountant since 2007.
Kadidia Traore Principal Spiegel Accountancy Corp.
Founder and Managing Principal, Jeff Spiegel, said, “Kadidia has earned this honor through her drive and dedication in keeping the firm’s financial reporting standards at their highest level.” The firm’s philosophy is to go beyond audit and tax compliance and strives to offer innovative solutions to its clients.
Principal Henry Chavez added, “Beyond excelling in all the technical qualities of being a principal, Kadidia has shown the intangible, steadfast dedication to maintaining and uplifting the core values of the firm.”
Both Spiegel and Chavez expressed their pleasure in welcoming Kadidia Traore to the Spiegel partner group and look forward to working with her. As for Traore’s sentiments about her promotion, she remarked, “I’m very excited for this new chapter of my career, and I look forward to engaging in the continued success of the firm.”
Spiegel Accountancy Corp. is a professional accounting firm based in the San Francisco Bay Area with a national practice specializing in the mortgage banking, private lending, real estate, and small business sectors. Spiegel’s vast knowledge and experience contribute to its dedication to provide client education, training sessions and webinars on issues that directly impact mortgage lenders, private lenders, fund managers, and other industry sectors.
Geraci LLP is a full-service law firm and conference line specializing in representing non-conventional lenders.
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