What Are Cross Collateralization Loans?
Cross collateralization is a method used by lenders to add more security to a loan transaction. It is accomplished by the lender placing a lien on another property in addition to the property that is the subject of the loan. Hard money commercial lenders who want to approve a loan request may not feel that the subject property gives them enough security to approve the loan. Having more collateral reduces their position of risk.
Benefits of Cross Collateralization Loans
The mortgage lender will benefit from using cross collateralization since it gives them more security for the loan being made. In the event that the borrower defaults, and a foreclosure occurs, the lender can foreclose on both properties, although this is not necessarily the lender’s focus. The lender prefers that the borrower make payments, and the loan is serviced successfully until such time that the borrower pays off the loan. The borrower benefits since he is granted the loan, and can use the funds for whatever purpose he was approved for.
At MCL CONSULTANTS, we offer our clients the opportunity to utilize more than one of their real estate properties in order to have sufficient equity to obtain the loan amount needed.
In addition to cross collateral, we have structured lien releases that allow the owner to refinance or sell one or more of the properties, subject to the relative and assigned portion of the mortgage. We can utilize previously ordered appraisals if they meet our guidelines as well as consider a realtor opinion of value on secondary properties. All appraisal requirements are at the sole discretion of MCL’s assigned underwriter and may require an updated appraisal, or second review. Please email color copies of appraisals to us for review with the application if available.
Cross collateralizing a loan also requires we have an understanding of the remaining equity. Please include information on lien amounts.
For More information on cross collaterals loans please contact us in confidence at 1-585 527 8151.
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