Featured LoanCOVID-19 Switched Lenders from 83% + 100% LTV To Close at 77% + 100% LTV
Loan Amount: $2,000,000
Loan-To-Value: 77% Purchase + 100% Rehab
Situation & Challenge
By the mid-March, this Fix & Flip + Rehab Loan in Los Angeles was ready for loan docs to go out at 83% LTV on the purchase and 100% LTV of the rehab to be financed. The lender financing the loan had an “originate and sell” model, where they’d originate higher leveraged fix and flip loans up to 80% of appraised value on the purchase and 100% of rehab costs. Every week, this lender would sell the prior weeks’ loans to an investor in the secondary market, which replenished their liquidity to fund a new round of loans week after week, month after month.
In mid-March, the secondary market investors stopped buying loans due to the deterioration in the economy caused by the mandated shutdown by local and state governments to stop the spread the coronavirus. The original had to suspend all funding, including this loan for a very experienced real estate investor.
Solution & Result
Fortunately, there are other higher leverage fix and flip lenders who originate loans and keep them on the books, or in their portfolio. FCTD quickly submitted the loan to the portfolio fix and flip lender, which provided the buyer with 77% LTV on the purchase and 100% of rehab financing to be spread out across 5 construction reimbursement draws.