Once the valuation report is received from the valuer the private mortgage broker forwards it to the private mortgage lender, along with the signed term sheet. It is then time for the lender to do their own due diligence. Like the private mortgage broker their focus is on:
the scenario, with particular emphasis on its veracity and the viability of the proposed exit strategy, and
the value of the security offered.
In reviewing the scenario the lender will perform Google searches on the borrowers, the directors of the borrower, the guarantors and directors of the guarantors and may ask for further information or documents that support the scenario.
A private loan is not subject to the same loan underwriting as a fully documented bank loan, however if the borrower claims their turnover is $3M then it is legitimate to ask for a copy of their ATO Integrated Client Account Statement for the last 12 months. That is not onerous, but it will reveal the veracity of their claim.
The purpose of reviewing the scenario is to discover any fraud or red flags. The lender needs to ensure the borrower and any guarantors are being honest and that their plans are realistic.
In reviewing the value of th