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For mortgage brokers, it has become increasingly difficult to find private bridge lenders with the expertise and the capital to underwrite a transaction properly and to close it in a timely manner.
Like traditional banks, many private lenders face a lack of liquidity. Credit lines have dried up, new investors are difficult to find and older legacy deals have consumed the lion's share of their resources.
Therefore, the selection of a private lender that can demonstrate on-hand capital to actually close a transaction, along with recent references from successful closings, is now more critical than ever.
Additionally, a bridge lender with the necessary real estate acumen and expertise to absorb the nuances of a real estate situation quickly and make a decision is important. Bridge lenders that can move quickly and provide proof of in-house capital can help opportunistic borrowers succeed in today's environment.
For example, consider a scenario in which an investor wants to purchase an REO property from a special servicer. The investment consists of a senior-debt position on a 180-unit, high-quality, high-rise apartment project that is well-located in a major metropolitan area. The borrower is an excellent local operator with tremendous market experience and industry contacts.
By providing proof of funds to the special servicer and being able to react quickly to seize the opportunity, the transaction can close in two weeks. The winning bidder may even have had the lowest bid of several for the asset but could close in the mandated two-week timeframe.
If the lender and borrower are confident in a U.S. Department of Housing and Urban Development takeout for the bridge loan in 12 to 18 months, they also can secure a strong overall return for the investment for the bridge lender and let the borrower obtain this property at a deep discount to today's market value.
Bridge lenders also can help in discounted-payoff scenarios. For example, consider another multifamily property in a well-located major metropolitan area. In this scenario, the borrower seized on a discounted-payoff opportunity from a special servicer and reduced the property's cost by more than 50 percent.
The special servicer's agreement for a discounted payoff was contingent upon a two-week closing. The borrower's bridge lender provided proof of funds and the ability to close in two weeks. With the discounted payoff, this bridge loan likely could be refinanced without much difficulty through an agency loan.
The market continues to face economic difficulty, but borrowers with access to fast-moving, available capital will see a window of opportunity. Although current markets are highly inefficient and dislocated, there is liquidity available from nontraditional sources.
Mortgage brokers can help borrowers capitalize on REO opportunities by finding the right capital partner with available capital and the ability to act quickly to help these borrowers acquire or refinance projects at significantly reduced costs.
is a managing director of Bloomfield Capital Partners, a direct portfolio lender that provides short-term debt instruments on commercial properties throughout the United States. Reach Stamell at (248) 745-1700, ext. 202, or firstname.lastname@example.org. For more information, please visit Bloomfield's Web site at www.bloomfieldcapital.com.
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