We had some questions come in from pool investors with some of you interested in a few details about our process for loan repayments. I wanted to write a short post so that everyone has an opportunity to to better understand the process, and ask us questions.
The New Silver 2 Pool is made up of individual construction loans, which typically contain an upfront loan for property or land purchase, plus reserves for construction. Loans are 12 to 24 months in maturity. We allow, with good reason, extensions of up to 6 months (and reserve the right, in rare circumstance, to offer an additional extension if its’ deemed appropriate for the situation). We have seen an uptick in extension requests in the recent months, mainly due to 2 reasons:
- We often get extension requests for properties that are under contract to be bought, or ready to be refinanced, but need a little more time in order to complete the process, which is often taking longer than anticipated.
- Less often, we get requests from borrowers who need more time to complete their construction work.
In both of these situations, our Asset Management team ascertains that an extension is appropriate. If an extension is granted, a new Asset is created on Tinlake to represent the extended loan, and the original asset is repaid. This is an internal refinance transaction, and not a repayment, since the SPV has not yet been repaid the principal loan amount. We are looking to improve this process and will likely open assets for the maximum 24 months maturity upfront, so these refinances will no longer be required, and each asset will be repaid upon SPV receiving the funds.
Hopefully this clears up the process for the community members that had questions. Feel free to ask us any if any additional questions come up.
**Edit based on some questions around extension diligence, adding additional context from our Asset Management team:
Questions we ask
- What is the exit plan?
- How far along in the process are you in your exit strategy and how long will it take to fully execute?
- What was the reason for the delay?
Based on those answers, if there is any doubt at all that the borrower does not have a solid plan or is not far enough into the process to meet the original timeline, we ask them to fill out an application for a Rent refi with us. This way we can run background/credit score to see what options we have on our end.
Docs: Depends on the exit plan
- If its a refi, we ask for the new lender/titles contact info. Once we have that, we reach out to them directly and asked for an update. if they make me aware of any hold ups on the borrowers side, we reach out to the borrower directly to ask them to rush.
- If it’s a sale, we ask for a copy of the contract and the titles info.
- Review past construction draws and inspection reports.
We do my best to force them to give me the necessary docs and to have a solid exit plan in place before we can approve any extension, but sometimes we have to base our decision on the inspection and other internal information.