The Nampa Idaho loan was a residential project on 11 acres. The Borrower owned the property free and clear, but needed a loan to finance the purchase of a separate property.The borrower had acquired the 11 acres for $300,000 over a year before the loan request. The borrower had a contract to turn around and sell the 11 acres, which contract was set to close in 3 months for $800,000.
BLoC researched the old title; and required a new one in addition to an ALTA lenders policy. The loan request was for $150,000 — or 50% (LTP) of the original purchase price and 18.75% (LTV) of the contracted sale price.
BLoC issued a 1st Deed of Trust for $150,000. The
borrower paid $6,000 in cash on the day of closing to pay for origination fees and points. BLoC held the $6,000 in the Fund’s bank account, thus reducing investors’ exposure to the loan (to $144,000 instead of $150,000) and improving the transaction’s LTV ratio.
Payment on the loan was delayed as the purchase contract on the land fell through, and BLoC extended the loan for 90 days on two separate balloon payment dates. On each extension, the borrower made a payment by bringing in all interest, points and extension fees current before the Promissory Note was adjusted. And each time the interest, points and extension fees were held by the Fund — thereby reducing the fund’s exposure to the loan.
Ultimately the borrower paid BLoC in full from the sale of another property. The original principal was recovered; Investors received their preferred rate of return. Then, and only then, were the managers allocated their profit.