Featured LoanCOVID-19 Fallout - Private Money Line of Credit
Loan Amount: $370,000
Loan-To-Value: 130% LTV
Rate: 7.99% (may not be included)
One of First Capital Trust Deed’s longtime clients was scheduled to close escrow in mid-March with a fix and flip lender when the mortgage market froze after the stay-at-home orders were issued due to the spread of the COVID-19 coronavirus.
That original lender, which was structured to originate and sell loans to secondary mortgage market investors, was essentially shut down in mid-March after being told by the loan buyers that no new loans would be purchased until they could get a better idea on the impact of COVID-19. Since most fix and flip lenders, including the most every lower priced lenders based in California, are set up to originate loans and sell to secondary market investors, fix and flip transactions, like this one in the Bay Area, were either cancelled or restructured with another lender to fund the transaction.
FCTD re-structured the loan with a private money investment fund that issued a HELOC for the borrower to acquire the property and have about $30,000 on the line to fund the cosmetic rehab. In order to fund the entire purchase price AND rehab costs, the lender used another property owned by the borrower as additional collateral to get as close to the original numbers from the fix and flip + rehab loan that had been scheduled to close in mid-March. Using the HELOC and the additional property made it happen.