First Position Commercial Mortgage 

1. What is a First Position Commercial Mortgage?

Our company funds 1-year bridge loans to commercial property owners secured by a first position mortgage lien on the subject property. A First Position Commercial Mortgage is a private third-party loan to our company that is secured by one of the commercial mortgages owned and held by our company. Private lenders are recorded on title and acquire a first lien position on these notes, and our company pays each lender immediate monthly interest payments at a fixed annual yield for one year, with a return of principal at the end of the one year term.


2. Why are they called First Position Commercial Mortgages?

The phrase “First Position Commercial Mortgage” describes the collateral pledged by our company as security for the loan you are making. As a private lender, you select an available property from our inventory to serve as collateral for your loan to our company. A First Position Commercial Mortgage loan is not a mortgage investment pool and it is not a direct investment in real estate. 


3. What is a first position in a commercial mortgage?

As a commercial mortgage lender, we execute only first mortgage transactions with commercial borrowers ensuring we hold the first lien on the property. If you have a first position, that means you have priority over any other liens or claims on a property if the property owner defaults.


4. With interest rates so low, why do borrowers come to our company?

Unfortunately, banks are not lending the way they used to. In today’s lending environment, real estate investors and borrowers are seeking out alternative financing that they can receive in 2 to 3 weeks, we provide this. We short-term commercial bridge loans to commercial property owners based on the value of their property. The borrower and the property qualify for our mortgages because our note is secured by the high value commercial asset itself.


5. What types of property are used as collateral in these transactions?

Generally, we secure these mortgages with commercial real estate, such as multi-unit apartments, office buildings, retail centers or mixed-use developments; though we will sometimes accept as collateral non-owner occupied, single-family homes that are held as investment properties and owned by a corporation or limited liability company.


6. What are some of the terms of the mortgage given to the borrower?

Our commercial mortgage lending policies dictate that we lend for a maximum loan term of two years and up to only 70 percent of the value of the real estate. That means the properties that secure the mortgages are worth considerably more than the loans themselves at closing. 


7. What type of due diligence do we perform on these properties? We perform a title search to make sure we have an insured first lien position and thoroughly evaluates each property by conducting a comprehensive appraisal to confirm market value.


8. Are the properties insured?

We obtain insurance coverage (as an additional insured and as the designated lender’s loss payee) on the encumbered property itself. This mitigates the risk of loss to the encumbered property’s value due to damage, destruction, natural disasters (earthquake, flood, tornado, hurricane, mudslide), and the like.

9. What is a lender’s collateral?

With loan-to-value ratios of 60% or less, the property’s equity is your collateral.


10. What is the paperwork required to get started?

When you lend on a First Position Commercial Mortgage, you enter into a Promissory Note and Loan Agreement that set the terms under which We repay you. 


11. How am I protected from downside risk?

Your loan is secured by a hard asset collateral - the property itself. Additionally, We maintain second lien position on all of our available mortgages, a testament to our confidence in our lending standards.


12. How do we establish that the property has no additional liens? We pay off any existing lien-holders when it enters into a transaction with a borrower so there are no additional liens on the property. Additionally, we obtain a title policy for each property, which is described in more detail below.


13. How do I verify that I hold a first lien position in the mortgage? Upon request, we will provide you with a copy of the title policy on the property which indicates there are no other liens or claims above you. 


14. Do you or the borrower make payments to me?

We make the monthly interest payments to you.