Legal Question in Real Estate Law in California

Re: negligent fradulent loan

To answer your first question, yes a private money lender can lend you money on any basis they desire - they make a decision, as an investor what level of risk they are willing to accept and for that risk what they should be compensated. That being said you are not going to like my answer to the rest of your question - I'm not being critical, just realistic. First, did you accept this loan knowing that you could not repay it? If so I don't believe that the lender is entirely at fault here. Why would you sign a blank document, and one that misstates your income? I assume you read the portion of the loan application right above your signature that states: "I/We fully understand that it is a Federal crime punishable by fine or imprisonment, or both, to knowingly make any false statements concerning any of the above facts as applicable under the provisions of Title 18, United States Code, Section 1001, et seq." Unless someone was holding a gun to your head forcing you to sign it, you never should have knowingly signed a loan application that was blank and/or misstated information. I'm confused as to why you believe this is entirely the lender's fault - I assume you received the proceeds of the loan?

Yes, the lender may share in culpability and even private money lenders are covered by State and Federal law, but those laws don't extend to underwriting criteria such as equity, income and expense ratios, etc... those kinds of criteria are business decisions to be made by the investor who put the money up for the loan. No, hard money lenders are not given a line of credit from the government - these are investors who use their own money to make loans, and they take higher risk than traditional lenders, but in return they receive (generally) higher returns on their money (interest). But in what you described, they are not solely responsible for any misconduct. You need to have an attorney perform a forensic audit of your loan and the documentation thereof - there may be some wiggle room to negotiate a modification of the loan based on the lender's failure to comply with Federal and State law, but I would suggest that its not helping you at all to place all the blame solely on the lender's shoulders - you participated in this as well, and share some of the blame.

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Re: negligent fradulent loan

Lenders determine their own rules for qualification, subject to Fannie/Freddie bundling requirements [if applicable] prior to the meltdown, unless you're talking about a 'broker' who helped you defraud a bank. If that is the case, I wouldn't suggest you make too much noise about it for fear of inquiry by the bank into your loan. If you are complaining that the lender allowed you to borrow money to buy a property you couldn't afford, that is not 'fraudulent' as between you two, but might look like it to the bank.