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Private Hard Money Loans Can Save Your Transaction

Written by Posted On Friday, 10 April 2020 07:53
Private Hard Money Loans Can Save Your Transaction

With all the recent market turmoil, many borrowers, investors and sellers are getting news that their current loans are falling out. While the market turmoil has caused many alternative loan shops to suspend operations, there are still non-traditional solutions available. If the transaction needs to close, private hard money loans can save your transaction.


In the last few weeks, we've seen many non-QM loan shops suspend operations. Most of those that have not suspended operations completely have made dramatic changes to guidelines. This was not a soft shift - but rather a hard shut down. Loans in process that had been locked and approved suddenly were suspended. This relates directly to what is going on in the broader market. The uncertainty has caused the secondary market to pull back. Essentially the lenders making these non traditional loans all of a sudden had no place to sell them.


This is a large segment of the current financing available to borrowers. Many borrowers may not yet know that their loans have been suspended while their brokers work to find another solution to save the deal. Unfortunately, until things really settle down and the secondary market comes back, many of these programs are not likely to come back online soon enough to save current deals that need to close.


An alternative to these loans, however, is available. True private hard money loans are funded in a different manner than these non-QM loans. While some hard money lenders do sell their loans on the secondary market, that is not the case for all. Those that do not are still lending and still making loans today. The difference between those beholden to the secondary market and those who are not comes down to portfolio lending.


Portfolio lending means that the loans being made are being held for the interest return. They are not loans that are meant to be sold on the secondary market. They are placed with investors, funds or groups who are liquid.  It does not matter if the secondary market is not liquid, as these loans are not being made on a warehouse line, packaged, and sold. This key difference is the difference between alternative loans that are still funding and alternative loans that have suspended operations in the current crisis.


While the market turmoil does mean that many investors, groups and funds have gotten a bit more conservative, it also means that there are alternative options for those who have a transaction that needs to close. These loans are typically more costly than what a non QM loan might have offered. These loans are likely to have shorter terms, and the loan to value may be a bit more conservative. With that beings said, hard money loans for investors are typically interest only and can fund relatively quickly. In today's market, there is likely to be opportunity for those with the ability to close a transaction. In those situations, private hard money loans can be a useful tool to have in your toolbox.

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Chris Goulart

I specialize in California private hard money loans.  These are non-institutional financing options for business and investment purposes.  I can help with most property types in California.  Most of the loans we can assist with are equity based.  We are not typically credit driven.  Our loans include long term options as well as short term bridge loans, construction, rehab and unique financing options that the banks may not be willing to provide.

www.acalending.com

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