High CLTV First Position Loans

High CLTV First Position Loans

This mailing will address the issue of High CLTV First Position Loans. Frequently we have clients come to us with scenarios whereby they are attempting to acquire or refinance a property and they are able to establish a strong equity position by persuading either the seller or some other party to subordinate debt to a first position loan. As you know, banks are not keen on this sort of thing and as a rule you won't see them do it. (I guess it messes with their statistical formulations.) We on the other hand, are more than willing to consider this type of proposal. Under the right circumstances, we will allow up to 125% CLTV with subordinate liens. The following is one example.

Scenario: We were approached by a borrower attempting to acquire a large furniture building from an estate. The borrower had an opportunity to purchase the building for $500,000, but the purchase was subject to the assumption of $200,000 in city liens. The city had agreed to subordinate their liens to a new first position loan, with a small partial pay down, and so our borrower needed a loan of about $345,000 to cover acquisition costs, closing costs, and the pay down amount to the city.

Problem: Institutional lenders proved unwilling to allow the subordination of the rather hefty city liens.

Analysis: We looked at the whole picture: this was a strong buyer making a good purchase and with a clear long-term strategy.

Solution: We agreed to make the loan, and worked with the borrower, the city, and the estate to put it together--and ultimately placed a 110% CLTV loan in the amount of $345,000.