The Problems with the Current Real Estate Lending Industry

The Promissory

When you buy real estate today, you have to sign a personal guarantee on the promissory note.

Lenders Can Pursue Your Assets

Most of the lending in the real estate sector uses a recourse funding structure. It means that the bank can pursue any of your assets id they are unable to recover the losses from the sale of a property in foreclosure. Recourse loans are preferred by banks since they know the borrower will lose more if they default.

Non-Recourse Loans are hard to find

In the current market, it is almost impossible to find a lender that will offer a non-recourse loan. Both major and small banks refuse to offer this loan because of the increased risk. They simply lack the expertise to structure such a loan in compliance with the market regulations.

Broken Lending Industry

Funder One Capital offers non-recourse loans. They will hold 100% of the instruments in their portfolio since there are no secondary markets for them. Existing banks bundle the loans eligible for the secondary market and sell them to investors such as Freddie Mac and Fannie Mae. It helps them to free up working capital to make more loans. However, Funder One Capital will hold the instruments since the project is tokenized.