Commercial Frequently Asked Questions
How does your Commercial Loan Restructure Program Work?
MFG will negotiate and buy your loan typically for 50-55% of current market value (CMV) from your current lender. Once we acquire your loan, we will restructure your principal balance typically down to 65% of CMV. At that point, you will have a temporary bridge loan with us for as little as a few days up to 1 year depending on your situation. Finally, we will assist you in obtaining a permanent take out loan.
Do you actually take title/ownership of my property?
No. We purchase your debt (note). In simple terms we buy your loan and therefore become your new lender. There is no change in the ownership of the property or the deed for the property and there is no affect on seasoning.
Why does your program only work for Income-producing commercial Loans?
We see the most opportunity currently in the marketplace. Due to the decline in values, many commercial property owners are in need of debt restructure. Furthermore, many lenders are under-capitalized and therefore, are willing to significantly discount and sell their loans that are over-leveraged.
When Would I Pay off the Bridge Loan?
MFG underwrites all of our loans with a heavy emphasis on the exit strategy. If you have good credit (680 or higher) and can qualify for a 65% Loan-to-Value (LTV) refinance or greater, then we will assist you in obtaining an long-term conventional refinance loan following the purchase of the note. Our bridge loans typically do not exceed 12 months.
How do I qualify for a Bridge Loan?
In order to be a good candidate for a bridge loan from MFG, the underlying borrower needs to meet the following basic criteria:
- The Current Market Value must be less then the current outstanding debt (min. 10-20%)
- The borrower must be able to service the new bridge loan
- The borrower must be able to qualify for an exit within 12 months.
Will the Lender sell my loan to you for 50-55% of Current Market Value?
Today many commercial loans are going into default. Banks do not want to take these loans back through foreclosure and are eager and willing to sell the note in lieu of foreclosure. However, there is no guaranty your lender will accept our offer. There are many factors that play a role in our ability to successfully negotiate and purchase your loan. (i.e. establishing a negative equity position, the size and location of the loan, the risk of the borrower, the desire of the bank to sell, etc). We have no way of knowing if the bank is interested until we present an offer.
What does it cost me to do a loan restructure with MFG?
Costs vary case-by-case but typically include legal fees for the workout and restructure of your debt. MFG typically dos not charge a fee to analyze and approve funding for a bridge loan.
Will this process damage my credit?
No, since the bank is selling the loan to a 3rd party (MFG), it will simply show a satisfaction of debt and will not show a negative impact on your credit. Furthermore, typically commercial loans are not reported to the credit bureaus.
Will I receive a 1099 for the deficiency?
Typically no. Remember, your bank is selling us your loan not giving you a debt forgiveness. As such, when we acquire your loan and modify your principal balance down to 75% of CMV, the typical transaction is structured where you are not required to get a 1099. We understand that this issue is important to you and that one of the benefits of working with our network is were able to restructure your debt in a way that this is not a factor. However, always consult with your CPA and/or attorney prior to finalizing any transaction.
What are the requirements for a takeout loan?
Most exit lenders require a 65% LTV for a traditional rate and term refinance. Another requirement is at least a 680 credit score and a 1.2 debt-coverage-ratio.
Can you help me if I have Junior Liens?
It depends. Typically when junior lien holders are involved, they must all be worked out in order to complete a restructure. Getting multiple lien holders to agree to favorable terms to the owner is sometimes challenging.
How much do I pay for my Bridge Loan?
In most cases, there is no fee if we can do the takeout in 30 days or less. If your bridge loan more then 30 days (up to 1 year), then you will pay 10-15% interest-only payments until you are able to secure permanent takeout financing.
What is the process to accomplish a successful transaction?
Here are all the steps from start to finish:
- Establish Current market Value and Net Operating Income
- Determine Bridge LTV and not buy price
- Engage attorney to conduct loan purchase and restructure transaction
- Secure exit financing
- Close on note purchase transaction and new bridge loan restructure
- Exit out of bridge loan within 12 months
What is the time frame for a successful transaction?
There are many factors that determine how long a transaction will take. Once we have an accepted offer from your lender we typically close in 30 days on the loan purchase and bridge loan restructure.
What is your success rate with commercial loan restructures?
Due to our nationwide network of affiliates, associates, intermediaries, sales agents and investors, we have successfully completed numerous bridge loan restructures. Due to the current lending climate with commercial loans, we have specifically forecasted a strong demand for bridge lending and loan restructuring and as such we are strategically targeting these types of opportunities. We will continue to stay at the forefront of industry demands.