- Equity position of 20% or more
- First mortgage
- 1-10 year maturities, or longer term amortization with balloon
- Good borrower credit
- Seasoned note with satisfactory payment history
- Mortgage payments current
- Market interest rate for risk involved
- Late charge provision in note
- Due on sale/right to approve Assumptor clause
- Financial statement on borrower
- First mortgage or large second mortgage relative to first
- Step rates which increase interest rate over time (not usual)
- Timber cutting clause on acreage properties
- Flood insurance required and maintained if property is in flood zone
- Professional note collection by third party
- Cross default clause in junior liens (default on first mortgage is grounds to default the second, even if current)
- Credit report on borrower available and up to date
- Reasonable sized mortgage compared to the property value
- Well written and structured note and Deed Release provisions
- Title insurance available and no exclusions
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- Limited equity/Small down payments
- Second mortgage. These are often worth only 50% of the current balance due to the increased risk of total loss if there is a default on the first
- Long term fully amortizing obligations (no balloons)
- Bad borrower credit
- Unseasoned note or simultaneous closing
- Mortgage in default and/or in foreclosure
- Below Market interest rate for risk involved
- No late charge provision on the note
- No due on sale or Assumption/Approval right
- No Financial statement on borrower
- Large amount of debt senior to subject debt (on junior liens only)
- Fixed rate note
- No timber cutting clause on acreage properties
- Property in a flood zone without flood insurance
- Seller collects own payments
- No cross default clause in junior liens (default on first mortgage can mean second is wiped out and holder of second has no right to default the second, if it is current)
- No credit report on borrower and no right to pull one
- Small size note or contract
- Badly written note
- No title insurance
- Subordination clause that could force the note into lower priority
- In reducing order. Second home. Tenant occupied home, apartments, offices, warehouse, industrial, vacant land (least desirable)
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