Inside Private Lending: A CMA Talk on Risk, Disclosure, and Automation
Even seasoned lenders can find themselves in hot water with regulators. In this CMA interview, Brad Laddusaw sits down with Christopher Donovan (Partner at Doss Law, LLP) and Aletha Nelson (Vice President at DossDocs) to talk through the issues that triggered audits, fines, and licensing threats. From missing key disclosures to misjudging business purpose, they break down what went wrong and how smarter systems and better documentation can change the outcome.
The Experts Behind the Conversation
These aren’t hypotheticals, they’re real scenarios pulled from the day-to-day challenges lenders face. In this candid discussion, CMA President Brad Laddusaw leads a conversation with two industry leaders on the front lines of compliance, documentation, and lender protection.
- Brad Laddusaw, President, California Mortgage Association (Host & Moderator)
- Christopher Donovan, Partner, Doss Law, LLP
- Aletha Nelson, Vice President, DossDocs
Table of Contents
Inside the Interview
The conversation goes deep into the risks lenders face when there are documentation fails or compliance is out of sorts. It’s filled with examples of how things go wrong and what smarter, better-equipped lenders are doing to protect themselves.
- When a “business purpose” label doesn’t hold up—and how regulators really determine intent
- The deal that unraveled when a lender didn’t realize it was a consumer loan
- How using old docs or outdated templates can put your license at risk
- What happens when a loan is made without a broker, without a license, and without legal docs
- Why courts and regulators only care about what’s documented, not what you meant
- What lenders should expect when the DRE or DFPI gets involved and what got them there in the first place
- If you’re still calculating fees yourself, your loan doc automation should do it for you
- What to look for in doc gen platforms and what’s missing from most
- Why the MLDS should be part of loan package when it is needed or required
- How automation and built-in prompts help lenders avoid costly mistakes before they happen
What You’ll Hear About in the Full Interview
Introduction and Sponsor Appreciation
- Why this conversation matters now, straight from CMA leadership
- A quick look at the regulators, risks, and real stories on deck
- Doss Law’s role supporting lenders when deals and disclosures get messy
Doss Law Intro
- What makes Doss Law the right legal team for private lenders
- Behind the scenes of major case wins and regulatory battles
- How changing case law (like Honchariw) happens and its effect on the industry
Client Engagement and Business Purpose Loans
- Determining business purpose and what regulators do when intent is in question
- A deal that got recharacterized as consumer, and what it cost the lender
- What your docs need to show if you want your intent to hold up
- What happens when the DRE or DFPI starts asking questions
Document Features and Industry Changes
- The docs lenders used last year may already be outdated
- How we’ve built in protections for table funding, language barriers, and more
- Real-time updates that reflect law, protecting lenders
AI in Private Lending: Benefits and Risks
- What AI can (and can’t) do for compliant lending
- What happened when someone relied on AI instead of actual legal counsel
- Where AI fits in the lender’s workflow without exposing risk
Automation Workflow and Compliance
- Why built-in logic and auto-calculations matter more than ever
- What a summary page does to catch mistakes and makes the process easier
- How built-in logic ensures nothing gets missed—from fee calculations to required disclosures
Personal Insights and CMA Private Money Basics
- Rescue work and passion for Belgian Malinois
- Family traditions, coaching youth sports, and future plans to teach
- First-hand feedback on CMA’s Private Money Basics training and what makes it different
- The value of education, shared stories, and substance over self-promotion
Video Transcript: Read the Full Interview
Want the full story? Press play or read the transcript. Whether you’re a broker, lender, or compliance professional, you’ll get real intel on what’s working—and what’s gotten lenders in trouble.
Introduction and Sponsor Appreciation
Brad Laddusaw:
So, my name is Brad Laddusaw, president of the California Mortgage Association, and I’m here with Christopher Donovan with Doss Law and Aletha Nelson with DossDocs. Thank you both for taking some time right after the holiday weekend to jump in the hot seat with me. Truly appreciate it. And Doss Law and DossDocs has been a longtime supporter of the California Mortgage Association. And you recently stepped up to sponsor Private Money Basics. CMA cannot put on events, educational courses like that without your support. So, thank you both for that.
Overview of Doss Law Services
That being said, I know we’re tight on time, so we’re just going to jump right on into it. Chris, would you mind taking a few moments to introduce yourself and Doss Law a little bit?
Christopher Donovan:
Sure. I’m a partner of Doss Law. Doss Law is a law firm that’s been around for close to 50 years, exclusively focused on representing private money lenders and brokers. We handle their loan documentation, fund formation, and compliance. Represent them in front of the regulators if they make some mistakes. We handle their securities work and we also do— which is kind of unique to us— we also do consumer credit as well, not just business purpose commercial.
Brad Laddusaw:
And then in that— so I told you we’re probably going to have some questions that are not on the list. That first question was on the list. This one was not. You corrected me the other last week when I was talking— you guys are mainly pre-litigation, correct? So, you’re kind of in from the beginning, middle of lenders setting things up, ideally correctly, to avoid that litigation. Is that— is that correct?
Chris Donovan:
That’s fair. Yeah, that’s absolutely fair. Our philosophy is, you know, to find a niche and try to be the best we can at it. So, we’re just focused on those services I said, and we— you know— we’ll handle everything up until the foreclosure process, up until, like, the notice of default. Once that’s time to file, we want a foreclosure company that specializes in foreclosures to handle that foreclosure for you. We could do it, but we just want to focus on our wheelhouse and really, you know, be as good as we can be at that.
Same thing with litigation. We handle, you know, all the letters and all the things that would lead up to that— forbearance agreements, modifications— you know, as far as we can take it. And once it’s time to— and we will— the only kind of litigation we work to do is in front of the administrative law judges. We will defend our clients in front of the DRE and the DFPI. We’ve scored some major wins for our industry doing that.
Business Purpose Owner-Occupied Loans
“You guys were right about this.
We can do these.”
~ The Attorney General
One was being with business purpose owner-occupied loans. I know some people don’t want to do them, but you can. And we locked Torrance with the DRE on that. And we were lucky enough to prevail. They— they bowed out a couple days before the hearing. The Attorney General called and said, “Hey, you guys— you guys were right about this. We can do these.”
But as far as just straight litigation, we hand that off to people that do that every day, and we think that’s the best service for our clients.
Brad Laddusaw:
Yeah, and I think that’s an important point to highlight there. I mean, you have some out there that pretend to be able to do it all. And I think if you’re going to a company—whether they’re a lender or an attorney or some sort of service provider—that is saying, “Hey, we can do everything under the sun from A to Z,” it’s like, “Alright, so what do you specialize in?” And I think having that specialty, I mean, just is extremely important. And you said Doss has been around for how many years?
Chris Donovan:
We’re pushing— we’re pushing 50. We— 47 years.
Brad Laddusaw:
Okay. Right. So, you don’t make a run like 50 years without, I think, being above average in what you do. You need to be exceptional. You don’t— you don’t have runs like that.
Client Engagement and Business Purpose Loans
Brad Laddusaw:
So, your clients, Chris—when they’re reaching out to you, are they reaching out to you right after they start their company? Or are most of your clients— have been running for a few years? When do they typically reach out to you? Is it after kind of sh*t’s hit the fan a little bit? Or are they more preventative?
Chris Donovan:
I’d say with us, because we’re geared towards the front end of the— the— the cycle of a loan, before it gets ugly and— and— and goes to litigation, that they are preventative. And a lot of our new clients are people that are— are new to the industry. And I— I really enjoy that part because you get to educate them from the ground up. You know, kind of like the class that CMA is going to do, but we do it— you know, it’s a little longer process than a one day, but you know, same— same type of deal.
We go through, you know, their company structure from everything to start.
And I— you know, when people do call us after, you know, things have hit the fan, that— that we don’t want.
Brad Laddusaw:
Way more polite than I am.
Chris Donovan:
Yeah. Yeah. Sorry about that.
Yes. So, they definitely— we get those calls, like that one I was talking— talking about with the DRE, that person had already made that loan. That person was already getting an accusation from the DRE. We hadn’t helped him with anything. And then they came to us to— to help him get out of it and save his license, because they were going after his license.
But overall, yeah, usually it’s— they’re early on, they’re new, they’re either— and a lot of them are in the consumer world, conventional, and you know, no one’s refinancing a 3% loan right now, so they’ve come over into our space and, you know, want to know how to do it right.
Brad Laddusaw:
Yeah. And I think you also kind of touch on a little pain point of mine. I feel a lot of us know enough to hurt ourselves. We talk to attorneys all the time. It’s like, “But hey, I don’t want to cut that check per se, because I think I could do it— do it myself.”
Let’s jump on to the slight nuance of that business purpose exemption I think you were alluding to when you were speaking on behalf of your client and friend. I believe it was the DRE, that business purpose exemption.
Were they— was it a consumer loan, or was it a business, like a cash-out refi secured against a primary? And can you do that?
Chris Donovan:
Yeah. It was an owner-occupied property that was the— was the collateral. And the purpose of the loan was for the homeowner to do a second edition of a book for, you know, for commercial gain— no personal, family, or household use— not a consumer loan.
So, it was a business purpose owner-occupied loan. For whatever reason, the DRE just decided to ignore that and said it was a consumer loan because it’s owner-occupied. And we’re like, “No, this is not even involved in Regulation Z. This is fully exempt because of the purpose of the loan.”
And the administrative law judge, we kind of hoped, would agree with the DRE so that we could sue her in superior court and sue the DRE in superior court and kind of make a— a statement for our industry that this is fine to do.
So, yeah, it is— some people don’t like to do it because it is more risky. There are a few more nuances that you need to know if you’re going to do business purpose owner-occupied. And one of the things that we’re doing now is a— is a DossLock, where we do a recorded Zoom and get them talking about the business purpose of this loan.
What are we really doing with these use of funds? Is any of this for consumer purpose? And get them on record so that if down the road you get a letter from their attorney, you just send them that video and you have their client saying all the things that we— that we know they were saying at the time.
And they can’t say they forgot and, “Oh, you knew this was consumer,” and all that kind of stuff. So, we think that’s a— a needed preventative measure.
Brad Laddusaw:
Yeah. And it’s where I think a lot have this misconception where they think it’s just because it’s an investment property, it makes it a business purpose loan. But it’s— it’s actually, I guess from that explanation, more of the use of funds that drives that ship.
Business Purpose Intent
“Purpose is king.
It’s not collateral type, it’s purpose.”
~ Chris Donovan, Doss Law
Christopher Donovan:
Yeah. One of our— you know, we have some axioms of private money lending like: get as much collateral and guarantors as possible. But one of the biggest ones is, purpose is king. It’s not collateral type, it’s purpose. So, you could have a sky-rise building, and you could do a consumer loan if the borrower is taking out funds to pay for his daughter’s extravagant wedding.
Or you could have a— an owner-occupied single-family residence and want to start a bike shop. That’s a business purpose loan. So, it’s not the collateral. It’s the purpose.
And I think a lot of mortgage brokers unintentionally will submit loans— I mean, to us, we’ve seen them and to others— where they think it’s a business purpose because it is secured by an investment property, but most of the proceeds are for consumer use. Maybe even that initial loan was a consumer loan, and you’re just doing a refi. That could potentially get you into hot water quickly.
Brad Laddusaw:
So, I like that— that interview. How has that been received by your clients and then their borrowers jumping on— on that interview?
Chris Donovan:
Really well, actually. Really, really well. And— and surprisingly enough, even borrowers’ counsel.
We also— if it’s a really dicey situation— like maybe we’re not in a clearly exempt place, maybe we’re using the numerosity test of, you know, more than 51% of the net proceeds are going toward business purpose, and it’s like— it’s at the limit— so we’ll actually provide an attorney opinion letter for borrowers’ counsel to sign off on. They don’t have to do any research on it— we did all of it for them— that quotes all the regs and everything to say, “This is a business purpose loan and why.”
So, that we have their attorney now on record vouching for them. But the DossLock, all the— no borrowers push back. Not once. So, our clients are using it and it’s— it’s going really—
Brad Laddusaw:
It’s like, you want the loan? Let’s just have a conversation. On camera. And you can see my baby blues. I can see yours. We can see that we’re real people.
And I— I feel some of the riskiest deals we look at— and we rely on mortgage brokers to send us loans— but sometimes those are the riskiest deals we look at because we are an additional layer removed from that borrower. So, I think that kind of helps cut straight through some of the smoke and mirrors that brokers— whether they do it intentionally or not— just allows us as lenders to just have that conversation.
So, it’s refreshing to hear that there’s not much pushback.
DossDocs Platform Introduction
And so I just want to pivot a little here and start throwing some questions Aletha’s way because you touched on some big points that I think DossDocs meant to solve.
So, Aletha, would you mind introducing yourself and DossDocs?
Aletha Nelson:
Sure. My name is Aletha Nelson. I’ve been with DossDocs for just over two years now. And as Chris mentioned, the attorneys at Doss Law have been laser-focused on transactional mortgage law for over 50 years.
So, they wanted to provide easy access for lenders, brokers, and investors with a simple cloud-based platform to generate attorney-quality loan docs for a fraction of the price— without any annual fees, subscription fees, or minimum volume requirements.
Our application’s intuitive, so it takes your answers during the intake process and then adds or eliminates documents to the final output for a custom experience.
I just want to hit real quick on the business purpose loan certificate that we do have in our loan document package. Based off of, you know, having to utilize the DossLock for our customers with Doss Law, we wanted to highlight in the certificate— in red, in bold— this is business purpose. And the borrower can’t miss it, unless they have some visual impairments.
But they do have to fill out the purpose of the loan and what they’re taking out those funds for. So, we want to make it crystal clear for everybody involved.
Brad Laddusaw:
I like that. I mean, sometimes— so with our investors, we have them— they have to wire directly to title. And every time— I print it out and it’s in red pen and it’s bold and it’s highlighted— it says, “Please reference the title order number.” I still miss it sometimes.
Got a loan that needs docs?
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Well-Documented Disclosures
“We’re only as strong as our docs.”
~ Brad Laddusaw, CMA
But in this instance, for docs— the interview coupled with that disclosure in red— I think can— it’s— we’re only as strong as our docs. And we’re not in the business to call our borrowers or brokers liars. That’s not good for business as well.
But from my auditing background, if it’s not documented, it’s not done. So, I think having that flow from Doss Law to DossDocs, it’s— you’re taking nearly 50 years worth of experience into those docs.
Document Features and Industry Changes
Brad Laddusaw:
I want to drill down on those docs a little bit more. Are they only for California? Nationwide? Only business purpose? What types of docs do you guys offer and what states?
Aletha Nelson:
Yeah, we actually have docs in all 50 states. So, although the majority of our docs drawn are for business purpose, they’re very feature-rich with the 50-state coverage.
You can cross-collateralize two properties, have two borrowers, four guarantors— you can get very specific on it. But we also have construction loan docs available. Our broker investor package is also highly utilized.
We have consumer bridge loans for California to other states. When you have a seller carryback that wants to do a transaction, we have those docs as well.
And then we’ve had for a while our modifications and extensions, forbearance agreement, the default letter, pre-negotiation agreement. And we recently added in a subordination agreement, as well as an intercreditor agreement. That was born out of a need from our customers requesting it.
So, we added it to the platform. And you know, taking their feedback into consideration as well, we’re also going to be releasing a payment reset letter too. That’s only going to be $99. And it allows you to quickly modify the first payment date and maturity date on your loan docs.
So, we have some major things coming up this year, but that’s what we have available right now.
Brad Laddusaw:
And I’ve talked to you two ad nauseam— both of you— about your services, and I just learned something new in all the new adds that you have with DossDocs.
I mean— so let’s rewind. A decade ago, it’s— you would probably— I don’t know, Chris— you’d buy a set of loan documents and then you would be just self-generating them yourself, or you would engage an attorney to draft them on a per-deal basis. That was effectively the two options, right?
Christopher Donovan:
Yeah. Yeah. Mail merge or pay an attorney.
Brad Laddusaw:
So, I’m going to ask you— as someone that buys a set of docs and has them for four or five years— what could go wrong just using that old set of docs, generating it yourself?
Again, a question not on the list.
Chris Donovan:
Yeah. No, good. You know, a lot of things. But it really depends on— has there been major changes in our industry during those five years? And that— that’s— who knows?
Usually yes. Usually there’s going to be some big ones. So, we made, you know, major changes recently on our agency disclosures. That isn’t a— that isn’t a case law change. That has changed just based on what we’re seeing— that there’s confusion from borrowers over:
When does your agency end? When does your borrower agency end representing the borrower as opposed to the investor?
Because we have situations where the broker’s now thinking they’re just representing the investor, and saying, “Hey, yeah, you should foreclose on this property. It’s worth a lot.”
But now the borrower is like, “Whoa. You’re trying to encourage him to foreclose on me? I thought you were my guy.”
So, now we’re clarifying that from the get-go.
Obviously, you know, one of the biggest ones that rocked our industry was Honchariw and default interest. So, we made major changes to our default rate provisions.
You have choices— whether you choose actual damages or do a default rate add-on— and tried to protect our clients as much as possible with that case and how that rattled our industry.
Honchariw v. FJM Case
“You can’t go from 12% to 18% on the full balance for a payment default anymore. That was a big body blow to our industry.”
~ Chris Donovan, Doss Law
So, you can’t go from that— whatever, let’s say 12% to 18%— on the entire amount for a prematurity payment default. That was the big body blow to our industry that hopefully we could rectify at some point.
Same thing with fires— like, we’ve added new natural hazard protection. So, all those things— you just wouldn’t have if you had a set of loan docs from five years ago.
Brad Laddusaw:
Can— can we dive into that Honchariw case a little bit? What— what was that final ruling? We don’t need to go into what happened with the case, but simplify it for someone like me that is a spreadsheet guy.
As far as what we made changes— not the changes— but what was the result of that case pertaining to the default interest? Because it changed how we’ve been doing it for— since inception, I feel like.
Chris Donovan:
Yeah. Basically, if you have a prematurity payment default, you can no longer change the interest rate on the entire principal balance.
Brad Laddusaw:
So, we have— we got our payments due on the first, late as the 10th. If— if we go to the end of the month— historically, depending on how that lender did things, they would probably assess that borrower a default due to lack of payment or a payment default and assess them at the default interest.
Now you’re saying that is no longer—
Chris Donovan:
That’s right.
Brad Laddusaw:
And then it’s only for a— a maturity default? Are you able to do it with the maturity default?
Chris Donovan:
Yes. Yeah, you can do it with a maturity default. There’s people testing what you can and can’t do before maturity. But yeah, absolutely you can after maturity.
But before that, you know, there’s a couple things you could try, but it’s— you know— shaky.
Brad Laddusaw:
I mean, who wants to be the next case study? Not me.
Chris Donovan:
I didn’t put on my boring sweater. When it comes to loans, I try and be as boring as possible.
Brad Laddusaw:
So, Aletha, back to you on the docs. The two companies— I assume they’re communicating very closely together for any changes not only in legislation but whatever judge wakes up and decides to rule on that— could affect how we apply certain things as simple as default interest.
How often is your team reviewing and updating your docs?
Real-Time Loan Doc Updates
“We don’t do once-a-month or quarterly updates. We’re updating all the time—based on case law, regulator changes, even customer feedback.”
~ Aletha Nelson, DossDocs
Aletha Nelson:
All the time. All the time, Brad. We don’t do once-a-month or quarterly updates. We are updating as ongoing cases are coming out. We make updates based off of our customer requests as well.
So, in Q1 of 2025, we had no less than 10 updates to our documents. We added in the death of key principal protection. We expanded our prepayment penalty options. We added table funding capabilities. We added the agency disclosure that Chris talked about.
We also added a language disclosure for people that are not native English speakers. We have those hazard provisions. And then of course we’re adding in those additional document packages like the intercreditor and subordination agreement.
So, we are doing multiple updates a month. I think we did like four or five in March alone.
Brad Laddusaw:
So, I think it’s— I mean, technology is moving quickly. We talked about just a decade ago— you’d get your own set of docs or you go to your attorney per set. To now, it being cloud-based, and you— us as your clients— are able to effectively get as real-time of updates on our docs as possible.
Whereas in the past, I’d email the attorney, be like, “Hey, have there been any updates over the last 12 months that I need to be worried about in these docs?” And the attorney would run through them, like, “No, no real big changes. Here’s a few redline changes. Go with this set going forward.”
Whereas now, something happens— it’s on our next set. It’s effectively implemented there.
AI in Private Lending: Benefits and Risks
Alright. Technology’s moving quick. Chris, our favorite conversation— AI.
Is that the saving grace to everyone out there? And what are potentially some of the benefits of AI? And what are some of the risks that you’re seeing in the industry as it pertains to implementing AI in our day-to-day disclosures?
Christopher Donovan:
Yeah. I mean, we’re using AI a little bit on our side just to make sure the readability of the documents is clear. There are a lot of different ways you can utilize AI.
I’ve been to multiple summits recently talking about some of the benefits as well as, you know, some of the failures of it.
AI has become extremely prevalent. I’ve heard horror stories— when I was at Finovate recently— where a boardroom with 25 employees deep-faked their executive and had them wire hundreds of thousands of dollars. And it was all AI.
So, they’re encouraging using safety words— you know, with family, with business— having some sort of code, just because of how advanced it can be.
Some other concerns to be aware of: when you put information in AI, it becomes public source information. So, it’s no longer proprietary. That’s something you want to be aware of.
But you know, there are some wonderful benefits. You want to do a LinkedIn post and you don’t want to think about how to type it out— throw it in ChatGPT, copy-paste, you’re good to go.
I would say it can be a valuable tool, but it should not be relied upon 100%.
Brad Laddusaw:
Yeah, Chris, we had a nice dinner— was it last year?— and there was a friendly conversation over dinner and— yeah, we won’t go into the weeds on what the battle was about— but would you mind sharing what the other person’s source was for a very big decision they were making for their clients?
Chris Donovan:
Yeah, I feel like it’d be hard to tell the story without going into the weeds a little bit, so I’m just going to touch the weeds.
Brad Laddusaw:
Let’s do it.
Chris Donovan:
Yeah. So, it was— I was having a—
Brad Laddusaw
Your name and my name shall go—
Chris Donovan:
Yeah, yeah, of course. Of course. Yes. Yes.
Brad Laddusaw:
Me and you and a bunch of random people.
Chris Donovan:
So, I was at one side of the table. I think you were, you know, on the other side or in the middle.
Brad Laddusaw:
I was like right in the middle. I was in the— yeah. You’re in the middle. You’re— you’re right there. 50-yard line, baby.
Chris Donovan:
Yeah. I think I was at one end, and the gentleman I was talking to at the other. And someone said, “Oh, what’s the late default provision for a consumer loan?” You know, business purpose for DRE is 10 and 10. A consumer?
AI in Private Lending
“AI said 15 and 5, but AI is wrong…
AI is not legal counsel. It’s a good tool for your toolkit, but it can’t be your only tool.”
~ Chris Donovan, Doss Law
I said, “Oh, you know, 15 days, 4%.” And our friend that has his phone out said, “No, it’s 15 and 5.”
I said, “No. I know this because I do it all the time, but also these gentlemen here at CMA— I’ve gone to webinars on consumer. It’s 15 and 4. That’s what’s on the slides. That’s the rule.”
So, anyways, then he went to show me the evidence, and I could see on his phone— I was like, “You are using AI.” AI is not legal counsel.
AI said 15 and 5, but AI is wrong, my friend.
So, yeah, that was a fun one. That was like a real-life thing that just kind of happened that you got to see play out, which was fun.
Brad Laddusaw:
Oh, we joke around about it all the time now, but I think that is probably one of the biggest risks of AI. It’s— it’s still in its infancy. Extremely powerful. It can be part of your tools that you use, but it’s— it’s tough to eliminate or go around legal counsel.
So, I am of the belief— and I’ve said this very loud since AI’s been gaining steam— that the individuals that are utilizing AI right now for contracts and to kind of save some upfront legal fees are going to be paying their attorneys a whole lot more in 12 to 24 months to get them out of the mess they got themselves into by trying to save a few bucks on the front end.
Especially if they’re utilizing it and they’re using a lot of their investors’ capital— or putting them into that. That scares me.
But I— I think it’ll keep you guys busy.
Christopher Donovan:
You know, we don’t want to— we don’t want to be that kind of busy. We’d rather— utilize us on the— it’s way easier to help— help us or have us help you on the front end than clean up a mess on the back end.
It really, really saves us time. It saves you money. We’d prefer that.
AI is a good tool for your toolkit, but it can’t be your only tool. It’s just one— one tool out of many.
Brad Laddusaw:
You make a very good point. Once you put it in there, it’s like public record. No longer proprietary.
So, if you’re putting in sensitive client information or non-public information into this open-source code, it’s— it’s out there.
And if you’re putting in structures or, again, very sensitive information, I think that’s something that should be yelled at the rooftops, because I don’t feel some newer implementers of AI really, really grasp that.
DossDocs Workflow and Compliance
I want to keep diving into DossDocs a little bit. You said all 50 states, disclosures, and you listed a lot of other features.
So, initial disclosures— like for, let’s bring it to California, because that’s where I’m at, and that’s where most of our CMA members are lending— do you help out with or have the ability to issue that MLDS with DossDocs?
Broker Investor Packages
“We have the 50-state broker disclosure, like the California MLDS. It does all the math for you—so you don’t have to generate it on another platform or try and use your math skills to figure out all the numbers.”
~ Aletha Nelson, DossDocs
Aletha Nelson:
Yeah. Our docs are written for everyday brokers. So, we have the 50-state broker disclosure, like the California MLDS. It does all the math for you.
So, you don’t have to generate it on another platform or, you know, try and use your math skills to figure out all the numbers. We do that for you.
And then we also have provisions for multi-lenders. We added in the MIN and the MERS. We have additional protections for junior liens, loan rebalancing, LLC pledges, SNDAs, SP provisions, bad boy guarantees.
And then you can cross any two points in America. So, for the DSCR lenders, we also included some table funding docs.
And then at the beginning of our documents, we actually have this really beautiful three-page summary. So, if you have, you know, a doc processor on your team that’s doing those docs for you and you just want to run quick QC— you make sure that summary is good. And if it’s correct there, it’s going to be correct through all of the documents.
Brad Laddusaw:
I think that’s a very important point, because it’s not really feasible for some people to do the originating, the underwriting, placing it with the investor, drawing the docs, setting up the loan servicing.
It creates a lot of spots for error, especially if you have to input the same number three different times or four different times.
So, it sounds like it is just a one-time upload and allows a manager or higher-up to be more in a review position versus the data entry. Is that fair to explain how that summary page works?
Aletha Nelson:
Absolutely. Yeah.
Table Funding
“Table funding is not allowed in California. You need to know where your structure crosses a line.”
~ Chris Donovan, Doss Law
Brad Laddusaw:
And you touched on something—table funding. Chris, question for you. And disclosure—didn’t throw this out there. This is not legal advice. No one’s attorney listening in. This is us just talking shop.
But I got a question for you. Can you do table funding? Is that allowable in the state of California?
Christopher Donovan:
No, it is not.
Brad Laddusaw:
Okay. Just— just want to say that out there. Consult with your attorney. But it’s— that’s my— my friendly, educational advice to you.
Chris Donovan:
Yeah. You read it in a book, right?
Brad Laddusaw:
Non-AI, years-of-experience advice.
And I think that’s something that, again, with the flood of institutional capital— I think it’s been great for lenders and borrowers to get access to different types of capital, different types of loan structures we weren’t even thinking about 15 years ago.
But just because you could do it in Missouri doesn’t mean you could do it in California, or vice versa.
And I think that’s something that all originating brokers or lenders should kind of take into consideration— just because you have the access to the capital, still may want to put in a phone call to your attorneys to say, “Hey, can I structure it in this fashion in the state of California, or do I need a license and what does that look like?”
And with DossDocs, I think it’s fascinating to me to hear all the add-ons that you’ve done to kind of probably catch some of these things.
It’s like, okay, you’re trying to set it up for table funding in California— it’s like, “Hey, that flag— like, probably can’t do that.”
And I think there’s great value in that.
Aletha Nelson:
Yeah. And Brad, every single one of our doc sets has a little disclaimer. It says, “If you’re unsure, ask your local attorney.”
Brad Laddusaw:
It’s important. You can’t say it loud enough. Yeah, you plug it into AI and AI says, “Sure you can table fund,” but it’s—
Chris Donovan:
Yeah.
Business Purpose Loans
“A lot of people think they can make business purpose loans in every state. It is different based on loan purpose, collateral type, lender type, borrower type — no two are the same.”
“They’re all different. Like usury rules.”
~ Chris Donovan, Doss Law
Christopher Donovan:
And hitting on that— just out of state— you know, I think a lot of people think they can make business purpose loans in every state. But you know, every state— like you were comparing Missouri and California— is different based on, you know, loan purpose, collateral type, lender type, borrower type.
No two are the same. They’re all different. Like usury rules.
So, talk to your local counsel if you’re going to venture outside of a state when you haven’t done it before and you don’t know the rules.
Brad Laddusaw:
No. And I think we help our clients with that. It’s like a good opportunity— again— if you have the ability to go into other markets.
Fifteen years ago, no one would really think about it because a lot would service their own loans.
Technology has improved greatly to where, potentially, you could outsource loan servicing. Now it’s more streamlined across a majority of the states. That was a big hurdle.
And the other one was loan documents. It was— you couldn’t find an attorney in Missouri that could also do docs in Florida, as well as New York.
And I think how quickly the technology has changed has allowed— it has opened up markets, but it has also created some unforeseen risks that no one really talks about or brings up.
Not going to get into tax implications of doing proper statements and filings in all these different states, but it’s great. But it’s a double-edged sword with that.
So, I want to pivot a little bit here.
Chris, where did you go to school? And did you always know you were going to be an attorney?
Christopher Donovan:
College, I went to San Diego State, and then I went to Thomas Jefferson School of Law.
I always— even when I was in college, I was in the pre-law society and always had a gravitation towards law. Originally, I was a financial adviser before that.
And I learned the number one reason for divorce and suicide was financial issues.
I wanted to help people with those so that they didn’t have those horrible outcomes. And so my goal was to kind of learn about finance as much as I could and help people with it.
While I was in college, I did commercial— commercial finance. Did basically what your company does. And I liked the legal side. It just kind of was more drawn to me— that area I enjoyed.
So, I jumped over to the legal side after doing kind of what your company does.
Brad Laddusaw:
And so you got on the legal side. Did you know you were going to be— once you— I call it— it’s not declaring your major, that’s what I did when I went to school— when you, I guess, made up your decision to be an attorney, did you know you wanted to be on the debt side out the get-go?
Or did it take some time to kind of find your specialty?
That always fascinates— I always ask this question to attorneys. Because some stumble into it, others are like, “Yes, I know I wanted this.” But how was it for you?
Christopher Donovan:
Yeah. I was— I’d already gone to college. I’d already ran my own business that was a direct lender and a broker, and I knew exactly what I wanted.
So, I always wanted this. You know, Dennis Doss is my mentor. I think pretty much anyone that listens to this probably knows who that is.
Brad Laddusaw:
If they don’t, they should.
Chris Donovan:
Yeah. When I read— I remember reading the posting after I had finished law school, and I read his posting for the position I’m in now, and I got chills.
I’m like, “This is it.” I called my wife. I’m like, “This is it.” And ever since then, it’s been it. So, I knew.
Brad Laddusaw:
And how long have you been with Doss Law?
Chris Donovan:
I’ve been with Doss Law since 2018.
Brad Laddusaw:
So, since 2018. So, we’re pushing on seven years.
I want to ask this: from when you first started to now, do you see some of your lenders— or clients— making some of the same errors that they did in the 2018 timeframe, 2019? Or do you see other kind of hidden— I guess landmines— in their processes due to some of this change in legislation or different court cases that have come down the pipe? Or is it kind of one and the same?
Christopher Donovan:
Yeah, I think it’s one and the same. Like, some of the problems have changed a little bit just because of different case law that has come out since 2018.
But it’s the same kind of mistakes— of making a deal without proper legal counsel and not really knowing what you’re doing.
That’s really what it comes down to when I see mistakes— like, we could have prevented all this if you just picked up the phone and we talked for five minutes.
But it was like that then, it’s like that now. It’s pretty much— you know, if you know what you’re doing on a deal, you’re comfortable, you’ve done it before, keep doing it.
But if it’s your first time seeing it, and you get a little funny feeling in your stomach, like something doesn’t feel right— call legal counsel that can help you.
Brad Laddusaw:
Yeah. So, do you see more deals get into a sticky situation on the underwrite itself— with value, verifying borrower— or do you see it more on the disclosure and the docs that kind of gets them into hot water?
Christopher Donovan:
I know it’s— it’s an annoying answer, but it’s both.
But the more— like the underwrite and the appraisal and the valuation situation— is its own thing that we don’t really get as involved in. We don’t— you know, we don’t underwrite your deals.
So, we see probably more of the other— disclosures, and not using— you know, some people are making— I mean, we get people that call me and they’re unlicensed private money lenders.
They didn’t go through a broker, they made a 12% loan, they used title docs— you know, they just have a note and a short-form deed of trust.
And it’s like, oh man, you just lent a million dollars and you didn’t, like, get any counsel at all. And it’s— yeah, those hurt. And I feel bad for them.
Brad Laddusaw:
Yeah. If we keep going down some of those innocent mistakes, I’d be drinking way too early on a Tuesday.
I’m of the belief that we can underwrite to value. We can get comfortable with that. We can verify borrower’s track record. We can pull their credit to make that kind of credit decision.
I think a lot of the risk is in that disclosure process— potentially doing a deal that you think is going one way when it’s actually not allowable— and then also that post-closing.
And your docs— I think we’re only as strong as our docs.
So, Aletha, if someone’s looking to use DossDocs, how does that work? Do they reach out to you? And do you offer demos? Walk me through how a new client or a new lender is reaching out to you for the first time. How does that process work?
Aletha Nelson:
Yeah, absolutely. So, if they have an integration with one of our loan origination software providers like Mortgage Automator or Liquid Logics, the process is a little bit different— because they’ll have already input the majority of the data into their system and then can just push it into ours, fill out any other questions that are necessary, pay, and generate their documents.
The other customers that we have— that don’t have the origination software— can either go to DossDocs.com, choose their state, choose their document set, and then just start doing data input.
And if they have any questions, they can reach out to support.
So, we have a fair amount of customers I never even speak with— because they’re just tech-savvy, adept, and they know what they’re doing.
And then of course, we have some customers who want that demo. So, I’m going to walk them through their first set. I’m going to show them how to use the platform.
We have a variety of how-to videos on YouTube available for them. And they can email support@dossdocs.com, and we go ahead and reply to emails even when we’re in meetings.
You know, we have a range of services available for them. So, it’s kind of— what’s your learning style? And we’ll help you out.
Brad Laddusaw:
And then with all the different disclosures that you offer, it sounds like on the lender side as well as borrower, on the front end— note modifications and some of the others— is it more of like an à la carte type service?
If I go in and say, “Hey, I want to draw a note modification,” someone could go in and generate a note mod.
It doesn’t sound— or maybe correct me if I’m wrong— there’s no onboarding to docs where we have an annual fee and then a volume base. I think you touched on that earlier, but would you mind elaborating there a little bit?
Aletha Nelson:
Yeah, sure. So, there’s no onboarding process. There’s no setup fees. It’s literally pay as you go.
So, if you want to generate just a modification, you can do that. With our business purpose, you’re going to get everything— the mortgage loan disclosure statement, your loan and sale security agreement, your note, your security instrument, and all of your state and broker disclosures that are necessary for you.
So, depending on how complex your deal is, that’s going to determine how many documents you get in your package. Right?
Smart Loan Doc Automation
“Because it’s smart, it’s intuitive— so it’s taking everything you’re putting in and giving you what you need.”
~ Aletha Nelson, DossDocs
Because it’s smart, it’s intuitive— so it’s taking everything you’re putting in and giving you what you need.
You can definitely— you know, if you have a preference on your servicing form and you don’t want to use ours, swap it out. Not a big deal.
But we’re going to give you everything you need based on what you said you’re doing on your transaction to make sure you’re doing it right.
Brad Laddusaw:
Got it. So, if I were to call you on a Thursday and say, “Hey, I want you to kind of walk me through this first time using DossDocs. I’m a threshold reporting broker, privately place my loans with high net worth individuals.
And so I need to issue the MLDS. I need the loan docs. We’re doing a fix and flip loan.”
So, with that basic information, you’d be able to say, “Hey Brad, you’ll want to select this package,” and within this package you’ll get the initial disclosures— the MLDS— which I think still surprises me how very few brokers actually issue that (but we’ll leave that for a completely different conversation).
But I’d be able to get that, then the docs, and then since I’m privately placing it with an investor, the initial disclosure such as the LPDS and a loan servicing agreement— I’ll be able to get that as well. Is that correct?
Aletha Nelson:
Yeah, that would be in our investor doc package. So, if you generate your business purpose set and you say, “Hey Aletha, I don’t want to rekey any information, but can you push this into this other set for me?”— I send you an invoice, I push it through, I give you a new link, and you can go on your merry way.
Brad Laddusaw:
Wow. So, I won’t need to go and input it for that separate document platform. It’s input on the front end, or— if we’re integrated with our loan servicing software— it could just pull directly, clean up some things or maybe add items that might not be in our origination software (which maybe we could add).
And that way it’s input once, reviewed a few times, pulls through. We’re just reviewing to make sure it’s accurate, and that could get pushed through to the LPDS and the investor disclosures?
Investor Docs
“One-click investor packages—generate docs for up to 10 investors with one data set.”
~ Aletha Nelson, DossDocs
Aletha Nelson:
Yep. And you can generate up to 10 packages on that investor broker package.
Brad Laddusaw:
Chris, why would it be 10 on a private placement quiz?
Christopher Donovan:
That’s the max. Yeah. That’s— that’s as high as you can do with the multi-lender rule.
Brad Laddusaw:
Thank you. I didn’t know. Didn’t know. Is it case study quiz day today?
No, I like it. It also produces a loan servicing setup form so you can board easier with your servicer.
I think a few really good things to highlight are that I don’t think other doc gen companies are doing— if they are, I don’t know about it— but it’s that it does produce all the broker disclosures. It does produce all the state-specific disclosures that others don’t.
And then also— when you create documents on Doss— you’re ready to go, or you can use your own legal counsel if you need it. There’s legal services over there. That’s why it’s the price it is.
But if you need legal advice— from what I understand, some doc companies either aren’t attorneys, so they can’t give you legal advice, or even if they are attorneys, they won’t. But we will.
Christopher Donovan:
So, if you need legal advice on DossDocs— because there’s a hybrid— you could either go attorney-drafted with us, and it’s going to be more expensive, but we’re going to do everything, right?
You can— on easier stuff, we created DossDocs so it could take care of those, you know, probably 90 to 95% of loans that are pretty straightforward— you could do on your own if you have experience.
But there’s also a hybrid model where you could generate on there and you could just pay the Doss Law attorneys at hourly rates for any legal questions you have— because Aletha or DossDocs wouldn’t handle those. But we could.
So, it’s truly under the Doss Law umbrella. To where it’s like— hey, you have a question on my docs? We’re here. Call us. We could walk you through that. You’re not required to. But— hey— we’re available.
Brad Laddusaw:
I love it.
Personal Insights and Event Feedback
Brad Laddusaw:
Yeah. All right. We’re doing a pivot here. Okay, Aletha.
When you’re not working, hitting conferences, onboarding new clients, what do you do for fun?
Aletha Nelson:
Uh, just like I said, when you’re not working— so I know you guys are always everywhere— but yeah.
Well, first, I’m a nature and animal lover. So, you know, I’m typically hanging out with my two Belgian Malinois, Atlas and Apollo. Apollo’s six, and Atlas is three. And they are my adventure ride-or-dies.
They swim with me, they hike with me. Wherever I’m going, they want to go.
So, they’re my adventure buddies, and I’m working on getting them to paddleboard with me. It’s a little tricky. Lots of flipping into the water on that front.
But yeah— paddleboarding, kayaking, wine tasting, spending time with my family and friends.
And then in my little bit of free time, I also volunteer for the Malinois and Dutch Shepherd Rescue. So, we help Malinois and Shepherds get out of shelters, into foster homes, and then work on getting them into a forever home in three months or less.
Brad Laddusaw:
That’s amazing. How did you get involved with that group?
Aletha Nelson:
Because of my Mals. Just looking it up. You know, there are an insane number of Malinois that are put down in Southern California every single month.
So, they are near and dear to me. They’re the smartest, sweetest dogs I’ve ever had. Protective, loyal.
And I’d love for other people to be able to have a positive experience with them. And oftentimes it’s just a matter of finding the right home.
So, being able to help with that process has just brought me a lot of joy.
Brad Laddusaw:
Yeah. And I think once you add a dog to the family— I mean, for people that aren’t dog people, if you babysit a dog for a few days, you’ll quickly realize how they’re like little humans.
And they have the emotion in their face. Like my dog— he’s a golden retriever— but that guy, he’s got some looks. It’s like, “Ah, you’re talking to me right now, bud. I can see it in your eyes.” You got the little head tilt going.
One more question for you: bucket list trip. Money is not an option. You could go anywhere in the world, with whoever you want. Bringing the dogs— what’s your bucket list trip?
Aletha Nelson:
I would spend a month, maybe two, in New Zealand and travel north to south doing every guided outdoor activity I could do.
So, ziplining, skydiving, cage diving, paragliding, jet skiing— pretty much any adrenaline junkie thing you can think of. I would do it.
Brad Laddusaw:
Damn. I’m glad I don’t have to follow you up with this question. I’m gonna ask.
Awesome. Thanks for sharing that. I was supposed to go first. What happened there?
So, Chris, when you’re not helping out your clients or in the office, what do you like to do for fun?
Christopher Donovan:
Um, I’m kind of boring. I’m a really dedicated husband and dad. I love being with my family.
We have such an amazing extended family that I really don’t— I have some, but I don’t need personal friends ‘cause we’re just huge and so close.
Actually, my cousin just got married in Newport Beach this weekend, so the whole family got together.
Every year we go to Tahoe, which is a big part of our family tradition. We have about 50 to 60 people that go up there— been going to the same area for around 60 years, since my mom was a little girl.
Which is really special and keeps all the cousins really tight and their kids really tight.
So, family vacations, spending time with them.
My more recent passion that I’ve enjoyed— my kids are now… my daughter Leila’s eight, my son Christian’s six. They’re playing sports now, so I’m coaching their teams.
I played college basketball. I’m a competitor. I like the whole sport environment. Not that it’s about that at this age— I’m all about having fun and wanting them to come back. Winning on top of that is nice.
But I just love the whole process— the teaching you can do through sports.
My family is a big line of teachers. When I’m kind of done and I don’t want to work as much, I’ll probably go into education and teach at a law school.
Because I just think you can really impact lives through teaching— whether it’s sports or in a classroom.
Brad Laddusaw:
Yeah, we’ve talked about that a lot ‘cause my boys are five and three. I told you at the last CMA conference that T-ball’s coming up.
My wife says I’m too competitive to coach T-ball. I ended up getting roped into coaching T-ball.
Chris Donovan:
It’s the best.
Brad Laddusaw:
But it’s so fun and rewarding to see these kids come— even at a young age.
And for the record, they all know what winning and losing is even at that ripe age. You don’t have to tell them.
I think with team sports, it’s growing together. It’s learning how to work in a team. And it’s also experiencing failure.
And there is such thing as losing graciously. You learn from it.
And then as a coach— and coaching your kids— I’m sure you see some that you’re like, “Oh, you’re going to be a stud athlete in five years.”
Or you already are, even though you’re six. You’re already doing stuff like, “Whoa, you’re a beast.”
That’s amazing. I know you have your family tradition trip that you do, but I’m going to throw the same question your way: bucket list trip. If money is not an option— whoever you want to bring— where are you going, what are you doing?
Chris Donovan:
You know, I think we just took it. I was very happy. The Tahoe thing is great ‘cause everyone’s there, but it’s a lot, right?
Every time we’re going rafting, we have to organize 50 people on rafts and it takes a while to move that ship.
When it’s the four of us— just my wife and my two kids— we can get a lot done.
We just did the Disney Dream in the Caribbean. Got to be there for a week. Stopped at three islands in the Bahamas.
It was beautiful. One nice part about it that I don’t experience on other vacations is I didn’t have internet.
So, I was officially on vacation. Usually, while I’m on vacation, I still get sucked in. I’ll work a little more than I probably should.
But I couldn’t. So, it was just fully checked out with my wife and kids.
We experienced different tropical activities— we swam with dolphins, stingrays, had little adventures on each island.
It was beautiful. I think anytime— whether it’s with your fur babies or just your kids— just being able to unplug…
Everyone’s so connected now with Wi-Fi everywhere.
When you can go and just force that phone off— I mean, the first 24 hours is hard, but you’ve got no option. Then after that, it’s, “Hey, now it’s just the sundial we’re working with.”
Brad Laddusaw:
One more question for you, Chris.
You attended Private Money Basics last October. Unfiltered feedback: what was your experience sitting in the audience, and what can attendees expect next month?
Chris Donovan:
Yeah. I’m not saying this just ‘cause we’re on here— it really was— I’ve been to a lot of CMA events over the years— it was my favorite CMA event ever.
Even more than the conferences.
CMA really distinguishes itself from other conferences— and I’m not going to name other events— but sometimes the panels, it’s kind of self-promotion rather than actual, substantive education.
CMA does that better than anyone else.
And the one-day class is pretty much all substance. There’s some networking, but it was really heavy on what’s actually important.
CMA’s Private Money Basics
“If you’re in that room, it’s going to save you— not necessarily from going to jail (but maybe)— and it’ll definitely save you from lawsuits, heartache, difficult loans.”
~ Chris Donovan, Doss Law
If you’re in that room, it’s going to save you— not necessarily from going to jail (but maybe)— and it’ll definitely save you from lawsuits, heartache, difficult loans.
Tangible stuff you can implement the next week. Just take great notes.
It was probably the most informational day you could have in our business— that teaches you as much as possible in a single day.
So, I’m a huge proponent of it. I’m going again because I loved it so much.
Brad Laddusaw:
I appreciate that. That feedback— always like getting unfiltered feedback, because it’s real.
And I forgot to say, the moderators did a pretty good job too.
You and Joffrey held it down and kept it moving. Sometimes people can get lost in the weeds— you’ve got to keep it back on track— and you guys did a great job of balancing interaction with staying focused on the main thing.
And it’s important to have attorneys like you there in the room. Attendees get access to you guys all day.
We’ve got Dennis up there, other attorneys up there.
And I like to ask pointed questions— that’s where the real value is.
Dennis and the other attorneys make themselves available to answer questions all day. You don’t get that access anywhere else.
And yeah— it’s a little like drinking out of a fire hose— but that’s intentional.
We’re going A to Z, full framework.
What we want attendees to have is this: here’s who you can contact at any point in your process, running a loan origination business, to make sure you’re doing it right or going in the right direction.
And we can’t have one-day courses like that without the support of Doss Law and DossDocs.
So, I want to thank you both for not only jumping in the hot seat with me today, but also stepping up as a sponsor.
You can’t put the appreciation into words. So, thank you guys so much for that.
Aletha Nelson:
You’re welcome. We’re happy to be there.
Christopher Donovan:
We’re very honored to be there. So, thanks for having us.
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