HOUSINGNEWS REPORT
PRIVATE LENDING GOES PUBLIC
policies but ask about conditions and costs.
“We typically offer two extension periods with each of our loans,” said Bobby Montagne with Walnut Street Finance. “For each extension, we charge one point to extend the loan for a period of two months. We try to ‘right-size’ each loan for the amount of time the project should take to complete and sell. Time is the enemy of most renovation projects, so this provides the borrower with incentive to stick to their schedule and finish the job quickly. However, delays do occur, so we do offer extensions.” According to Eric Krattenstein with Asset based Lending, “as long as the borrower is in good standing, we typically extend loans 90 days at a time for 1 point at the same interest rate. That said, we do whatever we can to reasonably accommodate our borrowers. The most common extension takes place when a property is listed or under contract and the borrower is just waiting for it to sell. In these cases we’ll try to be flexible; perhaps a prorated extension fee or waiving it altogether if it is just a matter of days.” “Anchor” said Stephen Pollack, “offers a standard extension agreement that extends a loan three months beyond the current maturity date for a fee of 1 percent of the note amount provided the underwriting conditions still make sense. The fee can either be collected within 7 days prior to the current maturity date, or it can be accrued onto the loan as a charge and collected at payoff. Anchor does not charge interest on the extension fee.”
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JOSH STECH SENIOR VICE VICE PRESIDENT OF EXECUTION LENDINGHOME
done it makes it easier for both the flipper and — if necessary — the lender to sell the project. “The number of draws or disbursements often depends on the total construction budget, as well as the scope and duration of renovation,” said Montagne. “For smaller projects and budgets, we usually recommend three to four disbursements; larger projects may have six or more. The borrower creates the disbursement schedule, with assistance from us if necessary. We do order third-party inspections before each disbursement, within 24 hours of borrower request. The inspector sends his or her report the day after the inspection, and we usually wire 24 hours after we get the report.”
Pollack explained that “draws can vary given the project size and scope of work. Our average fix and flip projects will typically consist of 5 draws, while large additions and ground up projects can typically average around 15 to 18 draws. Prior to funds being disbursed, every draw must be inspected in order to verify all work being reimbursed has been completed. Once the Anchor inspector has approved the draw request, our finance team will release the funds to the investor.” It happens that projects run long, say a few days or a few weeks. Borrowers do not want to be in a position where funding is overdue but settlement is delayed. Lenders likely have extension
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APRIL 2018 | ATTOM DATA SOLUTIONS
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