What is the profile of your typical borrower?
Our goal is to make quality loans at competitive rates to borrowers who won’t or can’t access capital from a traditional lending source. Likewise our “type” of borrower refuses to pay the high rates and points that a typical Hard Money Lender charges. Often times our borrowers are asset rich and cash light and may have a credit issue that prevents them from obtaining a loan from their local bank or credit union. On an acquisition, our borrowers usually make a large down payment and on refinance our borrowers usually have quite a large amount of equity built up in the asset (the asset is worth a lot more than the debt they have on the asset)
What are your loan requirements?
First, and most importantly, we only make first lien loans (no exceptions – not worth even asking for us to waive this requirement). Our goal is to offer the lowest rate and points that we can while in turn always making sure that our risk of making a bad loan is low. We do not undertake to enter into “loan to own” transactions, however, in all cases we underwrite each of our loans and stress our models so that if the underlying real estate collateral has to be sold to pay us back we are comfortable that we will recoup 100% of our capital including costs. This underwriting philosophy typically means that we do not lend on more than 65% of the value of the real estate collateral being pledged. We also require personal guarantees. Basically if you can’t or won’t go to a local bank for a loan and you are looking for a 65% loan to value or less, we believe we are the best deal in town.
What types of Collateral do you lend on?
We lend only on real estate assets. We do not lend on operating businesses, royalties, judgments, etc. We lend on many different kinds of real estate assets including:
- Single Family Homes
- Hotels and other Hospitality type assets
- Construction loans (both on commercial and residential assets)
- Multi-asset blanket loans
- Industrial property (warehouses, etc.)
- Retail property (strip centers, single tenant, stand alone, etc.)
- Office buildings and office condos
- Multi-family properties and mobile home parks
- Mixed-Use properties
Do you make loans only in Florida?
We make commercial loans in most markets within the U.S. and in Central America and parts of South America as well. For the time being we only make residential loans in Florida (with limited exceptions in NY, AZ, and IL).
What are the interest rates that you charge, the typical term, loan type and how many points?
We make many of our loans at an interest rate as low as 8.75% and 1.75% points. Our loan term is typically 1-3 years. Our loans are almost always interest only and rates are variable in nature with the rate resetting once a year based on a margin over an underlying U.S. Treasury index. We typically do not charge any pre-payment penalties, whatsoever.
Do you only lend to individuals?
We lend to individuals, corporations, single purpose LLC’s and in some cases trusts. We often make loans to foreign nationals.
What are your loan processes and timelines?
On Commercial Loans before issuing a term sheet or asking for an application to be submitted, we typically ask for the borrower to send us the address of the collateral and the requested loan amount. We then usually take no more then 24 hours to get back to the borrower to give them a decent indication our interest and terms. If both parties are on the same page we often times issue a term sheet that spells out in detail the terms and requirements of the loan. We then conduct detailed due diligence on the asset, collect information on the borrower and have one of our outside attorneys start drafting loan documents and reviewing title. At this stage, we will ask that the Commercial Borrower to deposit a small amount of money with the aforementioned attorney (this amount is credited at closing) and we strive to get the loan closed as fast as the borrower can submit the required information. We have closed commercial loans in as fast as 4 days, but our typical commercial loan closes in 10-14 days from issuance of a term sheet. On Residential Loans the process is similar, however we require a full application to be submitted and we then usually distribute a full set of loan disclosures as required by the law (Good Faith Estimate, Truth in Lending, etc…).
How are your loans serviced?
We service all of our loans in-house. We get to know each of our borrowers, interact with them, and try to make the payment and reporting process as simple and painless as possible. We issue a payment coupon book as well as year-end tax reporting information.
How do you deal with taxes and insurance escrow?
On most of our loans we do not escrow for taxes, condo / HOA fees, nor insurance. It is of course a default under the loan documents to not pay these obligations when due (we require wind and property insurance on all of our loans). As part of our servicing of your loan, we do check periodically to make sure these obligations are paid and will give you a “friendly” reminder when they are not. Finally, on each loan, we are named as additional insured on your insurance policies and are informed directly by your insurance carrier when a policy payment has not been made.
What is a “Hard Loan”?
A Hard loan is typically defined as a loan that the lender looks only to the value of the hard asset being offered as collateral. Unfortunately, in many instances with loans of this type the loan can be categorized as a hard loan because it is so hard for the borrower to make the payments! These loans have historically been made at rates in the 14%-18% range with an additional 4% – 7% of points.
What is a “Blanket Loan”?
A blanket loan is typically defined as a loan that is made to purchase or refinance various properties. In this loan, each property is used as collateral. Typically this loan will have provisions that allow for the borrower to sell off one or more of these pieces of collateral and use the proceeds of this sale to reduce the loan amount by an agreed upon amount (usually called a release price)
What is a “Bridge Loan”?
A Bridge Loan is a short-term loan typically taken out for a period of 2 weeks to 1 year pending the arrangement of longer-term financing. It is a method of financing used to maintain liquidity while waiting for an anticipated expected inflow of cash such as the sale of an asset. Since we do not typically charge pre-payment penalties, often times a bridge loan proves attractive to many of our borrowers.
Why won’t you lend on a “Primary Residence”?
When a loan deals with a primary residence there are strict provisions of various laws and statutes that limit the type of loan we can offer, which borrowers qualify and how loans are serviced. These requirements preclude New Wave Loans from making loans on owner-occupied residences.
If I am willing to accept a higher rate and / or points will you lend me more money?
Unequivocally NO! As stated in our “typical borrower profile” we are trying to make loans of low risk at competitive terms. Asking for a higher rate does not offset risk whatsoever. On a bad loan it just means that the Note has a higher rate, but no better chance of collecting our capital than a loan at a lower rate. We focus on loan to value ratios and try hard to determine what is truly the value of the collateral.
Other than points, how much does it cost to close a loan?
We typically charge no more than $995 in administrative fees to close a loan. Other than this fee all other costs are pass through costs to outside attorneys and/or title agents. Our outside attorney reviews title and draws up the loan documents. The cost of this legal work usually is in a range of $1250 – $2000 for a residential closing and $2500 – $5000 for a commercial closing. Also, in some loans, we ask for an appraisal and or a condition report. Again, these are direct pass through expenses to a third party and we do not “up-charge” for any of these reports.