Hard money lenders going mainstream.

The so-called hard money lenders-mortgage lenders who for a price will finance real estate properties that don't meet the specifications of prime lenders have gone mainstream in a way that was virtually unthinkable only a year ago, say executives at Pergolis Swartz Associates.

So aggressive and visible have these lenders become that they were the single most visible lender group at the recent Mortgage Bankers Association convention in San Diego, CA.

Hard money lenders played a key role last fall when borrowers lost their commitments from Wall Street and needed quick money to rescue their deals. In numerous cases, these hard money lenders stepped into the breach and saved the day. Hard money lenders also have been instrumental in bringing a class of properties to market that prime lenders avoid. Thanks to their financing, millions of square feet of renovated problem properties have been put back into productive use and economic viability.

"The hard money lenders have become almost institutional at this point," said Jerry Swartz, a principal of Pergolis Swartz Associates. "There are so many viable deals our there today that just don't meet the criteria of the prime lenders or the Wall Street conduits, that the hard money lenders have become an extremely important part of the mortgage financing scene."

Swartz noted that soft-hard money lenders typically lend at rates ranging from 10 to 14 percent, plus fees. They are vastly more flexible than other lenders on acceptable conditions - physical and financial - of a particular property. They are one of the key forces today in bringing problem real estate, highly speculative real estate, and adaptive re-use or rehabilitated properties into productive use.

"We're at a point in the real estate cycle when this kind of risk-tolerant debt capital is very useful," said Richard Pergolis, also a partner in Pergolis Swartz Associates. "We see deals every week on which no one but hard money lenders would make a mortgage. Many of these properties eventually find a prime lender to replace the hard loan at more competitive rates, but without the risk-tolerant lenders, the property never would have had a chance."

As little as a year ago, the hard money lenders were virtually invisible in the world of mortgage banking, where the banks, thrifts, insurance companies and conduits have reigned for decades. They worked largely through brokers or referral networks without any institutional presence. All that has changed today, to judge by the number of booths the hard money lenders had at the Mortgage Bankers Association convention.

"We counted more than 10 hard money lenders who actually had booths at the show," said Swartz. "This was nothing short of astounding. From invisible to one of the biggest presences at the show in one year shows just how much demand there is for this kind of lending today."