| Commercial Mortgage Liquidity Crisis | | | | Further, private loans (sometimes called "hard money" |
| We are, indeed, in the midst of a significant and severe | | | | loans) can close in just days, as-opposed to |
| credit crunch. Conventional lenders, such as banks, | | | | conventional loans which, if you get one at all, can take |
| Wall Street investment houses and insurance | | | | 3 months or more to fund. |
| companies have greatly curtailed their lending activity. | | | | There are generally no loan committees, stacks of |
| Even the very best investors and developers are | | | | paperwork or complicated ratios to deal with. If they |
| finding it hard to get projects funded. | | | | like your deal and you demonstrate that you can pay |
| The collateralized debt market has dried up. Few bond | | | | them back, they can and will close your loan |
| buyers are interested in mortgaged backed paper | | | | no-matter-what Wall Street is doing. |
| today. Big institutional lenders are finding it impossible to | | | | What Private Mortgage Lenders Look for |
| turn the mortgages they originate into cash. Put in | | | | Private lenders are equity based lenders; loan decisions |
| simple terms; no mortgage buyers, no mortgage loans. | | | | are not driven by the credit of the borrower. It is |
| Property owners, investors and developers are left | | | | essential that the collateral property have substantial |
| frustrated and without financing. | | | | equity in it. Most hard money commercial lenders won't |
| Good Deals have been Sidelined | | | | lend more than 70% of the purchase price or, in the |
| The dollar volume of pent-up commercial mortgage | | | | case of a refinance, the value of the commercial |
| loan demand now measures in the hundreds of billions | | | | property. So be prepared for large down-payment |
| of dollars. Deals that, just a year ago, would have | | | | requests or a good sized 2nd mortgage. Also, |
| enjoyed quick funding are being rejected by banks | | | | borrowers will need to have some cash, typically 10% |
| out-of-hand. Not because they don't have merit, but | | | | or more, in any given deal. There is no-such-thing-as |
| because the banks and their counterparts are caught | | | | 100% financing today. Documentation requirements will |
| up in the liquidity crises. | | | | be much less than conventional lenders would require |
| With millions in profit potential at stake, commercial | | | | but be prepared to back up any claims you make with |
| property investors are seeking out non-traditional | | | | some proof. |
| sources of mortgage funds. | | | | Income producing buildings are favored by hard money |
| Private Commercial Mortgage Lenders; Funding | | | | lenders but most are willing to consider all property |
| Deals When Banks Won't | | | | types. |
| Privately funded commercial mortgage loans are | | | | Hard Money Commercial Loans are now |
| becoming increasingly popular during this mortgage | | | | Indispensable |
| meltdown. Private lenders, many funded by wealthy | | | | With the large conventional lending institutions frozen |
| individuals, hedge funds or other large pools of capital, | | | | like a deer in the headlights, private, hard money |
| often lend their own money for their own portfolios. | | | | commercial lenders have become indispensable to the |
| These unique lenders have not been crippled by the | | | | commercial sector. They stand ready and willing to |
| breakdown of the collateralized mortgage bond | | | | lend against quality buildings or well thought-out |
| market. They can still originate loans at will without | | | | development projects. Investors should not give up on |
| worrying about who may or may-not want to buy | | | | finding financing for their best deals until they have |
| them. | | | | looked into a privately funded mortgage. |