Raising Second Position PML

[Kwok Wong]

Looking for some advice from experienced private money lenders , borrowers and investors.

I’m raising funding for a fix-and-flip deal. The property is already being financed by a hard money lender.

I found a potential private lender, but after reviewing the structure, he decided not to move forward because:

• The hard money lender does not allow second-position liens.
• He believes recording a second mortgage without the HML’s consent could violate the loan agreement.
• He said the only structure he would consider is cross-collateralization with another property.

For those of you who regularly raise private money:

1. How do you typically structure funding when the HML prohibits second-position liens?
2. Is cross-collateralization the most common solution, or are there other structures you’ve successfully used?
3. Have you obtained written consent from an HML for a second-position lien? If so, which lenders have been willing to do that?
4. If you were the borrower, how would you approach this situation?

I’m looking to learn best practices and understand how experienced investors handle this. Thanks in advance for any insights!