Private Money Lending is faster and much easier than Institutional Lending and not near as expensive as ‘Hard Money’!
WHAT IS PRIVATE TRUST DEED LENDING
When a loan is made on real estate, it is documented with a Deed of Trust, also referred to as a “Trust Deed.” A Promissory Note is signed by the borrower and it serves as a legal agreement to pay back the loan. A “Deed of Trust” is simultaneously executed, which ties the “Note” to the property or properties. It is then filed and recorded at the county recorder’s office.
At Alpen Mortgage we match the borrowing needs of real estate developers with the needs of our Investors. Because of our deep connections throughout the building, development and commercial industries, we are consistently presented with private lending opportunities which in return can be matched with our extensive family of private investors.
This is a true “win-win” relationship, as developers have a trusted source when they are in need of funding and our Investors know they have a trusted source to place their money.
Our objective is to find loans in the community which provide an opportunity for both our borrowers and Investors. For our borrowers, we carefully select investment opportunities which are often “near bankable,” meaning just outside of banking standards. We also receive loan opportunities directly from financial institutions that are “bankable” however, for various reasons, they are unable to fund within the required time frame.
WHY DOES A BORROWER SEEK PRIVATE MONEY?
Borrowers seek ‘Private Money Investors’ rather than ‘institutional’ bank financing for many reasons.
- Banks can sometimes take several months to fund a loan.
- A private money borrower would sometimes rather pay a higher interest rate through a Private Money Investor then experience the time consuming and long list of conditions associated with seeking traditional funding.
- Many banks have limits on how much they can lend for certain types of projects. We have the ability to fund larger loans, such as construction and land acquisition, with more flexible terms and conditions than most traditional banks can offer.
When we evaluate a borrower, we may consider all or some of the following items:
- Prospective plans for the property (to occupy, rent, develop, etc.)
- Financial & income status
- The borrower’s assets and obligations
- The borrower’s credit and references in the community
- The borrower’s ability to repay the loan
The main focus of our evaluation process is determining the realistic value of the collateral. We evaluate specifically the type of property and/or the feasibility of success of the project, potential complications and any potential roadblocks to the property(s) or project completion We also use recent data in the market which can help achieve recent rather than historic values.
We also typically require personal guarantees from our key borrowers. A personal guarantee grants an extra layer of security should the borrower or borrowing entity default on the loan.
At times, we will suggest cross-collateralization of properties. Cross-collateralization creates a better equity position for the Investor. In case of borrower default, cross collateralized properties will be used as security to protect the Investors’ loan.
LIEN PRIORITY AND SECURITY
A First Trust Deed investment is in the best lending position on a property because by being titled first it signifies it is in the senior lien position. Subsequent Trust Deeds (2nd, 3rd, 4th) put those loans in subordinate positions behind the First Trust Deed accordingly.
To protect the lien position held on each property, Alpen Mortgage requires title insurance on all loans. Title insurance ensures the lien position to any other prior or future liens or claims placed against the subject property.
Nearly all investment opportunities arranged by Alpen Mortgage are in the First Trust Deed position. Occasionally we will lend on Second Trust Deeds if the combined loan to value is extremely low. We do not lend on personal property.