Staying Proactive in an Evolving Lending Market
Our Continued Commitment to Our Private Investors
At Pacific Direct Mortgage, we remain committed to providing our Private Investors with the information, documentation, and support needed to make informed investment decisions. We continually evaluate our processes and procedures, finding opportunities to further strengthen documentation and transparency.
A Changing Lending Environment
At the recent California Mortgage Association conference, industry professionals discussed an increase in loan defaults, bankruptcies, and foreclosure activity throughout California and across the country. Recent statistics support this as well. According to ATTOM, foreclosure filings increased 13% year over year in August 2026, while Epiq AACER reported an 11% increase in bankruptcy filings during the first nine months of 2026.
Although foreclosure activity remains below historical highs, these trends serve as an important reminder of the need for diligent lending practices, thorough documentation, independent investor underwriting based on your individual risk tolerance, and clear communication with borrowers.
We believe the best approach is to remain proactive, continually evaluating our procedures and strengthening them wherever appropriate.
Strengthening Our Borrower Documentation Process
We continue to look for ways to improve our lending and documentation process. Recently, we’ve added several steps to further document each borrower’s loan purpose, confirm their understanding of the loan terms, and maintain a more complete record of each transaction.
- Borrower Purpose Letters with Notarization
We have always required borrowers to provide a written Purpose Letter at the beginning of the loan process. We now also require borrowers to sign and notarize this Loan Purpose Letter at final loan document signing, reaffirming the intended loan purpose through a notarized, sworn statement. This adds another layer of identity verification and accountability to the borrower’s representations.
- Business Purpose Loan Declarations
For business-purpose transactions, borrowers complete a separate Business Purpose Loan Declaration Form where the borrower further documents their intended use of loan proceeds, including information about the borrower’s business and it requires acknowledgment that they understand the distinction between business purpose and consumer purpose lending.
Borrowers must also confirm that they have not been instructed or influenced to classify a consumer purpose transaction as a business purpose loan.
- Recorded Borrower Confirmation Calls
We have also recently implemented a recorded borrower confirmation call. During these calls, borrowers are asked to explain the purpose of their loan in their own words, confirm their understanding of important loan terms, discuss their intended repayment strategy, and verify that they are voluntarily proceeding with the transaction.
These recorded conversations now provide another layer of verification and create an additional record of the borrower’s statements and understanding of the loan.
- Additional Borrower Acknowledgments
We have introduced a Borrower Acknowledgment form requiring borrowers to confirm that they have reviewed their loan documents, understand the financial obligations associated with the loan, and that they have been provided an opportunity to ask questions, etc.
This acknowledgment also addresses important terms, including repayment requirements, balloon payments, prepayment provisions, and the potential consequences of default.
This new documentation helps establish that borrowers understand the commitments they are making before entering into the loan.
A more complete picture of every loan.
One of the most important aspects of Private Money lending is ensuring that the purpose of each loan is properly identified, understood, and documented.
Together, these additional steps provide multiple documented confirmations of the borrower’s intended loan purpose, rather than relying on a single statement. By combining written purpose letters, separate borrower declarations, recorded conversations, and signed acknowledgments, we are strengthening the documentation supporting each transaction.
These additional measures are designed to reduce misunderstandings, provide greater transparency, and establish a more comprehensive record of the borrower’s intentions and obligations. We believe these improvements contribute to a stronger loan file and thus a good trust deed investment.
Our Private Investors are an important part of Pacific Direct Mortgage, and we greatly appreciate the relationships we have built over the years. We understand that you have choices when it comes to investing your capital. Your continued confidence in our team is something we value and never take for granted.
We will continue evaluating our practices, identifying opportunities for improvement, and maintaining the high standards you expect from us.
Thank you for your continued trust, confidence, and partnership. We sincerely appreciate the opportunity to work with you.
Warm regards,
Ken & Ari Walker and the Pacific Direct Mortgage Team
DRE License #02030528/ NMLS ID #1654959
Phone: 707-708-0797
Address: 1400 N Dutton Ave #22 Santa Rosa, CA 95401
Disclaimer: This newsletter is provided for general educational purposes only. It is not intended as legal, tax, or investment advice, and should not be relied upon as such. Every transaction is unique, and applicable laws may vary depending on the specific facts and circumstances. Investors should perform their own independent due diligence and consult their own legal, tax, or financial advisors before making any investment decision.
