This Nevada business owner researched USA Capital’s deed of trusts, and was told the deeds were secured by homes which had 50% LTVs, and in a worst case scenario, she could go after the homes as assets. Now USA Capital is in bankruptcy and she may not see her money again.
What really struck me is that the government is NOT monitoring these lenders at all, and that USA Capital was recuiting new investors long after they knew they were in deep do-do, until 2 weeks before the bankruptcy filing. How were they allowed to get away with this? Isn’t there any oversight?
We will see many more fraud and corruption cases in the coming years.
Here’s another guy in Nevada, who lost his retirement nest egg when his mortgage broker went bankrupt. The guy invested in real estate trust deeds with Global Express. What is going on with trust deeds in Nevada? Is this nationwide?
It seems each state has its unique problems: construction defects in FL because FL law allows large builders to hire their own inspectors (Lennar class action lawsuit?), trust deeds in NV…
These are probably hard money lenders, which are regulated by the state rather than the federal government. When they do their job right the investor’s risks are a little higher but not excessively so; and the returns are pretty good. The maximum 50% Loan to Value (LTV) ratios and higher interest rates on those loans are pretty common.
Where the potential problem may be here is that the “V” part of the LTVs are critical to the security of the investments. If the original appraisals are overstated or the market is declining to the point that it’s increasing the LTV then it also increases the investor’s risks. For that reason these hard money lenders need a good appraisal more than even the biggest banks.
If these lenders are engaged in a ponzi-type operation that would also cause these kinds of problems. From the article it looks as if both problems are occurring.
.
