A small but growing slice of the mortgage market has shifted from mainstream banks to an informal, loosely regulated corner of property finance, the Wall Street Journal reported today. These lenders can earn 8 percent and more on their money — the catch is they must stomach the risk of lending their savings to borrowers rejected by banks. “It’s the Wild West out here,” said Corey Kohnke, who spends his days driving around Orange County, Calif., matching borrowers with investors looking to make loans, a job that pays commissions of 2 to 8 percent. Private lenders charge annual interest rates as high as triple those of a conventional 30-year fixed-rate mortgage. Some issue loans from personal fortunes and collect monthly interest payments. Others make loans and sell the note to investors. There also are private mortgage funds that pool investor money. “We can’t make loans fast enough to sell them to our investors,” said Michelle Rodriguez, general counsel for R.C. Temme Corp., and its affiliate, private lender Woodland Hills Mortgage Corp. in Los Angeles. When the firm’s salespeople call investors to market the loans, she said, “they’re snapped up within minutes. Literally, 15 minutes and they’re gone.” Read more. (Subscription required.)
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