Private Money In Lieu of Non-QM/Bridge Loans; JVM/Mortgage Bank – Here to Stay; Eating EMDs
PRIVATE MONEY = TEMPORARY SOLUTION
Both agents and buyers are reaching out to us to save transactions that have blown up elsewhere b/c both bridge loan and non-QM financing has dried up.
Bridge loans are temporary loans against a property that will soon be sold (in most cases), and non-QM loans allow for alternative income documentation, e.g. rental income and bank statements.
Currently, the best/only option for many borrowers with sufficient equity or down payment funds is “hard money” or “private money.”
Private money loans typically don’t require any income documentation and instead focus primarily on equity and the property alone.
Private money is of course much more expensive, but it is now often the only option for buyers with 25% to 30% down payments and/or equity cushions (for bridge loans).
Private money borrowers should expect to pay two to three points with rates in the 8% to 11% range.
JVM IS HERE TO STAY
Some of our borrowers are expressing concern that JVM and/or our mortgage bank might go belly up after their loan funds b/c of everything they are reading about so many mortgage banks sitting on the brink of financial failure.
In light of this, I wanted to state that both JVM and our mortgage bank are more than fine and definitely here to stay. We are not at risk like so many other mortgage banks for several reasons.
It is the lenders who service loans that are currently at risk b/c so many borrowers will likely start to miss payments. But b/c we don’t service our loans, we don’t have that risk.
The other big risk was “margin calls” brought on by surging mortgage-backed security prices. This is very complex and I won’t go into details, but this risk has now passed too for the most part.
FORBEARANCE INFO RESOURCE CENTER
So many agents and borrowers are asking for forbearance info that we decided to create our own Forbearance Resource Center.
We highly recommend sharing this with anyone who might have questions about a forbearance.
LENDERS CAN’T EAT EARNEST MONEY DEPOSITS (EMDs)
Both buyers and agents have been asking us on occasion to release contingencies for marginal loans and then to also agree to eat/reimburse the EMD should the financing fall through.
In normal markets, we are happy to help buyers make non-contingent offers with the EMD risk on us.
But in this market, there is no way we or any lender can take on this risk with loan guidelines changing so quickly and abruptly.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167