Residential Frequently Asked Questions
How does your Jumbo Loan Restructure Program Work?
MFG will negotiate and buy your loan for 60-65% of current market value (CMV) from your current lender. Once we acquire your loan, we will restructure (modify) your principal balance down to 75% of CMV. At that point, you will have a temporary bridge loan with us for as little as a few days and/or up to one year, depending on your situation. Finally, we will assist you in obtaining a permanent take-out loan.
Do you actually take title/ownership of my property?
No. We purchase your debt (note). In simple terms we buy your loan and therefore become your new lender. There is no change in the ownership of the property or the deed for the property and there is no affect on seasoning.
Why does your program only work for Jumbo Loans?
Jumbo loans are non-conforming loans in that they are not packaged and sold to the secondary market. Since they are portfolio loans, we can negotiate and purchase them. In addition, lenders are willing to sell them since they are high risk loans.
When Would I Pay off the Bridge Loan?
MFG underwrites all of our loans with a heavy emphasis on the exit strategy. If you have good credit (680 or higher) and can qualify for a 75% Loan-to-Value (LTV) refinance, then we will assist you in obtaining a long-term conventional refinance loan immediately following the purchase of the note. In most cases, this occurs in less then 30 days. In the event you are in default and have poor credit (less then 680), we will structure up to a one year bridge loan to allow you time to re-establish credit and qualify for a 75% LTV long-term conventional refinance loan.
How do I qualify for a Bridge Loan?
In order to qualify for a bridge loan from MFG, the underlying borrower must meet our lending guidelines as follows:
- The loan must be a Residential Jumbo Loan (at time of origination);
- The Current Market Value must be less than the current outstanding debt (min. 10-20%); and
- The borrower must be able to qualify for an exit within twelve months.
Will the Lender sell my loan to you for 60-65% of Current Property Market Value?
Today, Jumbo Loans are the highest default loans in residential lending. Banks do not want to take these loans back through foreclosure and are eager and willing to sell the note in lieu of foreclosure. However, there is no guarantee your lender will accept our offer. There are many factors which play a role in our ability to successfully negotiate and purchase your loan (i.e., locating the proper decision maker, establishing a negative equity position, the size and location of the loan, the risk of the borrower, the desire of the bank to sell, etc). We have no way of knowing if the bank is interested until we present an offer.
What does it cost me to do a loan restructure with MFG?
Costs include the fee for an appraisal (which is required) in order to establish Current Market Value, as well as legal fees for our attorney to draft the note purchase paperwork and loan restructure documents. Costs for legal fees typically range from $3,000 - $4,000. But remember, legal fees are not incurred until AFTER we have an accepted offer from your current lender and are ready to close. At this point you are about to realize a debt reduction of several hundred thousand dollars in most cases! There are no fees for us to get you pre-approved or to negotiate the note purchase.
Will this process damage my credit?
No, since the bank is selling the loan to a third party (MFG), it will simply show a satisfaction of debt and will not show a negative impact on your credit. If your credit is already damaged, we will assist you in repairing your credit as quickly as possible.
Will I receive a 1099 for the deficiency?
No. Remember, your bank is selling us your loan. It is not giving you a debt forgiveness. As such, when we acquire your loan and modify your principal balance down to 75% of CMV, the typical transaction is structured where you are not required to get a 1099. We understand that this issue is important to you and that one of the benefits of working with our network is that we're able to restructure your debt in a way that this is not a factor. However, always consult with your CPA and/or attorney prior to finalizing any transaction.
What are the requirements for a takeout loan?
Most exit lenders require a 75% LTV for a traditional rate and term refinance. Another requirement is at least a 680 credit score and a 30% or less debt-to-Income ratio, which means that your payment (including taxes and insurance) is 30% or less of your total gross income.
Can you help me if I have Junior Liens?
Only if the junior lien holder and the first lien holder are the same. If the junior lien holder(s) is different, then in most cases we cannot assist you. The reasons are as follows: 1) With junior liens there is now one or more lenders to work out in addition to the first lien holder. 2) It is extremely difficult to get all lien holders to agree to a reduction that works for us. 3) Remember, the first is only concerned with their equity position and does not base their discount on the junior liens.
How much do I pay for my Bridge Loan?
In most cases, there is no fee if we can do the takeout in 30 days or less. If your bridge loan is more than 30 days (up to one year), then you will pay 10-15% interest-only payments until you are able to secure permanent take-out financing.
What is the "Acknowledgement of Note Purchase Transaction Agreement" I have to sign?
The purpose of this agreement is to disclose to you in writing the following: 1) It lets you know that our intent is to make a profit buying and restructuring your existing debt; 2) It states that there are no guarantees that we will be able to purchase your note; 3) There are fees you will have to pay if and only if we get an accepted agreement from your lender to buy the note, and; 4) In the event we get an accepted offer and engage our attorney, you agree that they can contact you to receive pertinent information.
What is the process to accomplish a successful transaction?
Here are all the steps from start to finish:
- Order an appraisal (establish CMV);
- Pre-qualify you for an exit loan within one year (pull credit, get pre-approval letter);
- Present and negotiate loan purchase with bank;
- Once the offer is accepted, engage an attorney to conduct loan purchase and restructure transaction;
- Secure exit financing (if qualified for immediate refinance);
- Close on note purchase transaction and new bridge loan restructure;
- Exit out of bridge loan within five days to one year.
What is the time frame for a successful transaction?
There are many factors that determine how long a transaction will take. Once we have an accepted offer from your lender, we typically close in 30 days on the loan purchase and bridge loan restructure.
What is your success rate with Jumbo Loan restructures?
Due to our nationwide network of affiliates, associates, intermediaries, sales agents and investors, we have successfully completed numerous bridge loan restructures. Due to the current lending climate with residential Jumbo Loans, we have specifically forecasted a strong demand for bridge lending and loan restructuring and, as such, we are strategically targeting these types of opportunities. We will continue to stay at the forefront of industry demands.