Our Underwriting Process
To ensure financial success for both our investors and borrowers, Bridge Loan Financial undergoes a comprehensive three-step process to determine if the loan will be approved.
STEP ONE | Preliminary Assessment
Our underwriting committee calculates a best and worst case scenario for each loan
Q: Is this a property we would want to own and operate?
Q: Should a rare foreclosure occur, is our investment capital secure?
A: If the answer is “Yes” to both questions, we proceed with the underwriting process.
STEP TWO | Due Diligence AssessmentABILITY TO PAY
Q: Does the borrower have the resources necessary to make payments and to payoff the loan at maturity?
A: We make this determination by documenting and evaluating the borrower’s assets and liabilities, employment, income, and general financial stability.
Q: Has the borrower demonstrated a successful history of timely payments?
A: We evaluate the borrower’s history of fulfilling payment obligations, in part by ordering and carefully analyzing the borrower’s credit report.
Q: If the borrower fails to make the payments or otherwise defaults, are we protected?
A: We perform a thorough evaluation of current market value to confirm we have a margin of safety well in excess of the loan amount. This process typically includes: (1) ordering a new appraisal, (2) obtaining one or more Broker Price Opinions, and (3) conducting a physical site inspection.
Q: Is there a legal entanglement?
A: We require a comprehensive legal review of the borrowing entity, and the loan documents’ structure and content to ensure there is a clear path to protecting our investor’s principal and interest.
If the borrower has met the underwriting parameters outlined above, we proceed with the final evaluation.
STEP THREE | Final EvaluationThe appropriate loan amount is determined. Bridge Loan Financial targets an average LTV of 50% for the portfolio with a maximum LTV of 70% for each individual loan.
We must have a high degree of confidence that in the event of foreclosure the securing property can be sold in a timely manner at a net price sufficient to pay off: (1) our investors’ capital; (2) all outstanding interest and fees owed under the loan terms; and (3) our estimated costs to foreclose, manage, and market the property.
Only when these requirements are met are we prepared to move forward with a loan.