This was a rare situation where the second lien holder used a hard money loan to buy out the first lien holder at a discount, taking out a new hard money first trust deed in order to complete the transaction.
We’ve received several requests over the years from people with no skin in the game (no money) wanting to use hard money to buy a portfolio of distressed loans. However, we’ve never received a request from the junior lien holder seeking a new loan to pay off the lender in first position at a steep discount.
We were very impressed with the loan for a few different reasons:
First, we were impressed that our borrower had already purchased the hyper-defaulted second trust deed for about 20 cents on the dollar.
Second, we were impressed that our borrower had persistently pursued a discounted pay off from the senior lien holder, who, after nearly an entire year, agreed to sell the note to our client.
Third, we were impressed that our hard money lender in Los Angeles quickly got his head around the situation and issued an approval for $850,000 based upon the as-is value of the house and funded the loan within a week.
Hard Money Financing Terms:
- $850,000 Loan Amount
- 10.50% Interest-Only
- 12-Month Term
- No Prepayment Penalty