It's not "funny".  Lender is not the seller. Lender is an independent third party.
Mortgage broker has a person that wants to purchase or refi a home. They can't get a traditional bank loan for one of many different reasons (mobile home, bad credit, loan amount too small, building vs land value doesn't meet criteria, etc). Since it doesn't qualify for a "traditional" mortgage, a "hard money lender" loans the money. It is secured by the real estate (generally less than 50% loan to value) and amortized over 10-30 years. Interest rates are 10-15%.

Drake and ProSeries software handle these quite easily. ProConnect Tax doesn't want to handle interest received unless it is via 1099-INT