This high-end, spec house was nearing completion when Seattle Funding Group was approached to provide bridge financing to pay off matured loans. Given the size and scope of the project, (over 8,500 square feet with a completed value in excess of $6m), the broken or loss of priority was among the first and largest of the underwriting challenges to be addressed. In today’s title environment, a project at 90% complete opens a Pandora’s Box of concerns for lender and title company alike. Fortunately, the sponsor/builder understood the issues and responsively embraced the need to round-up and provide the proof of payment and unconditional lien releases necessary to demonstrate that all subs and suppliers had been paid. Those documents, together with a clean, lien-free job, solid experience and excellent credit, made them exactly the type of sponsor for whom SFG is willing to allocate resources of time, staff and relationships.
Seattle Funding Group is one of the few private money lenders that maintains a construction department. Our department manager, Jim McBride, a 15-year member of SFG’s staff, assists in all matters related to underwriting construction elements, review of improvement plans, specs and budgets, fund control management, overseeing the draw process, coordinating site inspections…and playing a major role in evaluating projects involving broken priority. Jim’s experienced oversight, coupled with the strict management controls SFG has developed over the decades, creates great value for our builder and development clients, and insures far fewer challenges once the ink is dry, the loan is closed and the hard work begins.
At the same time, SFG has developed and maintains strong relationships with among the largest of the title insurers. While loss of priority is a dirty word and major problem for all within the title industry, SFG’s long-term title relationships and peerless performance often allows us to find solutions for these difficult title situations. SFG called upon one such long-term relationship to address this challenge. All parties immediately rolled up their sleeves and worked toward the solutions necessary to identify and mitigate the risks otherwise associated with financing construction projects AFTER ground has been broken, PRIOR to completion and long BEFORE the tolling of the lien period. And once again, title performed their due diligence, supported SFG’s internal findings, and identified a means of providing the coverage and protections SFG required to make such a transaction work from the title perspective. SFG of CA knows the title professionals to call when navigating broken priority.
As to the deal itself, the numbers were easy at under 55% LTV, the location excellent, the product top-notch, and the sponsors/builders were tailor made for SFG. It was a textbook case of broken priority, and it came down to underwriting and eliminating the title risks to fully and properly protect SFG’s family of funds…our fundamental objective for 28 years and counting.
