Investment Companies Providing Opportunities Banks Can’t

There are even more reasons why a trust deed investment company would be needed, even by ordinary individuals. Every lending product is different, and banks and trust deed investment companies have very different regulations covering their activities.

Let’s take a look at the imaginary scenario of a man named Jeff. He wins the lottery and splits the jackpot with a group of friends so that he walks away with 4 million, after taxes. He’s opted to receive the money in annual payments over the next 10 years. He decides he wants to use part of the money to build a 12,000-square-foot house on the shores of Lake Tahoe. However, a 12,000-square-foot, completely elephant proof house will cost him $4 million and he’s opted to take his jackpot earnings in annual payments. He doesn’t have all the money up front. So what does he do? Can he go to the bank? Maybe. But the Federal Institutions regulatory and Reform Enforcement Act (FIRREA) limits the amount of money banks can loan to any one borrower. So Jeff puts up $500,000 and approaches his good friend Millionaire Mack, asking him to lend Jeff the remaining half a million. Millionaire Mack agrees, but only if he can charge a 12% interest rate and can secure the loan with the lakefront property and home.

In real life, trust deed investment companies fulfill the role of Millionaire Mack in the above example with the difference that, in real life, Millionaire Mack would serve as the intermediary. Someone behind the scenes-an investor-would have given Mack the money to loan Jeff. This system works well for Jeff, though, because Millionaire Mack is willing to loan Jeff as much money as he needs.

Trust deed investment companies operate in a similar manner. They sky’s the limit when it comes to how much money trust deed investment companies can loan to any one borrower. They’re not under the same chokehold as banks in regards to lending limits. Some of the other reasons that trust deed investment companies might be needed instead of banks are: there is something unusual about the borrower, there is something unusual about the property, oor there is insufficient equity. These categories can include specifics like: the borrower has a low credit score (perhaps they managed their money well enough never to need credit?!), too many late payments on loans (which is a negligible risk when the property is held as security), opr a property which seems undervalued (which is easily fixed by requiring a higher interest rate or different terms). Trust deed investment companies are in a position to be flexible about these things, and so can serve a market that the rigidly regulated banks, bastions of bureaucracy that they are, can not serve.

Therefore people in unusual situations, or with specialized money-making methods, can get the money they need to keep their own millionaire dreams chugging along, all the while fueling others’ dreams in the great circle of life!