Are asset based loans gone for good?

Question

Does anyone know of any lenders still doing 30 year refi loans on rental property with just asset based criteria?

That was my main BRRRR strategy and it know seems like its gone.

Alex Bekeza · Answer

@John S Lewis As I'm sure you've found, 99.9% of the folks doing these loans have paused operations.  Luckily, I know several that still have 100s of millions of dollars in liquidity (fine in the long term) but have paused alongside their competitors as a conservative measure in the wake of uncertainty caused by this virus although the big issue is servicing/back end (dried up secondary market for these loans/pending foreclosure wave).

They're definitely not gone for good but many companies who were over leveraged when this all hit may or may not be able to come back.  However, all the big players will be back once some positive news regarding controlling this pandemic will be reflected in the stock market.

Most of my partners are currently thinking they'll be back with modified guidelines (higher rates, lower LTVs, stricter guidelines) within a month or so.

FYI, it's not just asset based loans that are taking a hit.  Conventional lenders are getting crushed right now too.  Wells Fargo just shut off Jumbo Loans as did UWM (biggest wholesale lender in the country).  FHA/Conventional guidelines also have tightened (higher min. FICO for example)

Things will get worse in the next few weeks before they get better.

Do you have a ballooning note?  How soon do you need to refi?  Stay in touch over the next month or so and I'll be happy to share what I'm seeing on the market for these.

Here's a few good reads:

https://themortgagereports.com/64357/coronavirus-causes-mortgage-mayhem-with-new-requirements-and-no-rate-locks

http://www.mortgagenewsdaily.com/channels/pipelinepress/04032020-forbearance-letter.aspx

All the best,

John S Lewis · Answer

@Alex Bekeza - thanks.  I don't have a ballooning note.  I was in a deal; it would've been a great buy, fix, rent, refi.  The HML at the last minute jacked up the interest rate from 8.99% to 12%, and doubled the points from 2 to 4 for the rehab period.  Also, they then required 6 months of interest reserves to bring to the table, not just show them in the bank.  So these terms made the deal untenable.  I then saw many emails from other big nationwide HML's about stopping the 30 yr fixed product.  I was in line for a very good rate at the time, on the 30 year, at the back end.  But it went away.

Tarik Turner · Answer

In regards to the initial question. This global issue is not like the crash in 2008 and was not directly caused by the real estate market. So while we have all been affected for sure and while certain things may change for good. I do expect most of the same mortgage products to return at some point on the other side of this Pandemic