Did you know that some hard money lenders are beginning to lend to churches? Banks are foreclosing on American churches in rapid numbers and banks are reluctant to refinance their loans. There are more than 300,000 churches in America. Approximately, more than half of them find themselves in trouble. Some are fighting foreclosure; others had to auction themselves off. Some hard, or bridge, money lenders have created specialized loan funds to help churches in need. Interests are high and there is always the risk of the money lender ending up with the ecclesiastical property. But some churches may prefer taking the risk to closing.
What are hard money lenders?
Hard money lenders are investors who personally loan you the direct funds when you need the money and cannot get it by traditional means due to low credit report or history of bankruptcy. Such money lenders use the borrower’s hard assets, or in the case of a commercial or residential loan, they use your real estate as collateral for the transaction. The entire process takes less than ten days depending on circumstances. Upfront fees are sometimes nil, the underwriting process is insignificant, and you can negotiate for almost unlimited funds.
The catch is the high interest fee and the low property to ratio value where the money you are given is less than the actual value of your property.
Six month ago, Song Quichocho released a press report that reported that certain hard money loan companies had created specialized loan funds to help churches that had fallen on difficult times. The loans were funded by private accounts especially created for churches that were close to or were actually in foreclosure.
Conditions of the bridge loans included the following: They were up to five years. Churches still had to repay accrued interest at the end. The lender purchased the church property and gave the church a lease purchase agreement. This served to protect the lender so that he had the property to fall back on were the church to default on the loan.
Under normal circumstances, the high interest dissuades churches from approaching bridge money lenders. But there are enough churches in straitened conditions who find themselves with the cross of either losing the building or saving it. These churches approach relevant hard money lenders for the loan.
When should a church use a hard money loan?
The church should look into a personal loan under the following situations:
The church has fallen behind on its payments and is being threatened with foreclosure.
The church’s loan is unable to qualify for a traditional loan.
The church has to close quickly on a reduction that is offered by its current lender.
The church wants to take advantage of a one-time opportunity; it needs the money fast.
The church is facing bankruptcy; a loan would save its property.
If you’re a church, what are your chance of getting a hard money loan?
If the church were to seek a bridge money loan, it would be offered a commercial, rather than a residential, one. The lender is using his own private money to make the loan so he’ll investigate the church property to see whether it deserves it. Generally, older and better kept up churches in prime property and with mesmerizing reputation stand a better chance. The lender is not interested in your FICO score, your income, or even your current ability to pay back the loan. All he’ll want to know is whether your collateral is worth more than the value of the loan that he is giving you. Be aware, though, that not all hard money lenders are alike. Each has his, or her, pet loans that she prefers, and each lender borrows to different kinds of people. Each also sets his arbitrary fees, schedules, and terms of repayment. Shop around. Most importantly, make sure that your money lender is certified by the National Mortgage Licensing System (NMLS) as well as by state regulatory agencies. Lenders, too, have to follow the Dodd-Frank Act which stipulates that lenders have to ask for no more than two prepayments (depending on circumstances); that the borrower is able to repay; that terms and calculations are transparent and explained; and that interest is reasonable. Some states such as Tennessee and New Jersey have added additional regulations that prohibit lenders from imposing excessive interest.
What are the lending parameters for a hard money loan for a church?
Not all bridge money lenders borrow to churches. To those who do, perimeters differ. I suggest that you shop around for hard money lenders and thoroughly investigate their profiles before you proceed. I have written various other articles that show you how to do that. The government, too, has recently tightened its consumer regulations and requirements from hard money lenders so that if you are considering travelling this route you will find yourself better protected than ever.
The bottom line is this…
Hard money lending does give you higher interests, but the news for churches is not good. Too many of them are losing their worshippers and their pews. If you’ve been around for a good many years and want to keep your pulpit, you may have to – rather than want to – consider an alternate route.