Novato Private Lender Suspended From Providing Loans

A Novato-based lender suspected of defrauding investors has had its lending license suspended as scrutiny around the firm intensifies.

The California Department of Financial Protection and Innovation issued an order accusing Pacific Private Money of a “severe liquidity crunch” in December that led the company to suspend all investor withdrawals and monthly distributions, the San Francisco Chronicle reported. Since that move late last year, more than 100 retirees and other clients have been unable to access roughly $100 million in investments as the firm stopped payments to its clients.

The state’s order imposes a 30-day suspension on Pacific Private Money’s lending activities while regulators investigate the firm’s financial condition and compliance with state law. Existing contracts between the lender and its borrowers will not be affected. In addition to the action from the California Department of Financial Protection, the Marin County District Attorney’s Office is also pursuing its own investigation into Pacific Private Money.

Pacific Private Money was founded in 2008 by Tiburon entrepreneur Mark Hanf and specializes in short-term bridge and hard-money loans for owners looking to buy, renovate or refinance properties. The company reportedly pooled investor capital to fund loans with interest rates typically between 8.5 and 12 percent, pitching them as real estate-backed investments offering steady returns.

Along with its affiliates, Pacific Private Money has financed hundreds of loans throughout California over the past decade, according to property records cited by the Chronicle. The firm is licensed to operate in seven other states and claims to have funded over 3,000 loans totaling more than $2 billion since its founding.

Hanf has landed in hot water in the real estate market in the past. In 2014, the California Department of Real Estate fined Hanf more than $18,000 and temporarily suspended his broker license for illegally placing investors’ money into bank accounts under his control instead of the trust accounts they were meant to go into. Hanf previously filed for Chapter 7 bankruptcy in 2007. The broker did not respond to requests for comment from the Chronicle.

— Chris Malone Méndez