Reserves
This option allows the user to select on a loan by loan basis whether the lender will withhold funds as a generic lender holdback subject to a variety of conditions that the user MANUALLY enters. The actual language will be entered into the Loan Agreement and REQUIRES MANUAL EDITING by the user before the documents can be provided to the Borrower.
This option allows the user to select on a loan by loan basis whether to include a Capital Expenditure Reserve.
A CapEx reserve is typically used for multifamily and/or commercial real estate loans. It’s money set aside specifically to pay for things like buying new equipment or making major repairs or improvements to the property. Lenders sometimes require borrowers to create and fund a CapEx reserve as a way to ensure that the property stays in good shape and continues to be a good investment. If this option is selected, a borrower may request funds once per month from the lender for these purposes.
This option allows the user to select on a loan by loan basis whether to include an Occupancy Reserve. If the borrower intends or the lender requires the borrower to vacate tenants from the collateral property, the lender can withhold funds from the loan proceeds at the time of funding. If the tenants vacate the property and surrender possession of the property back to the owner, prior to the date entered by the user, these funds will be delivered to the borrower.
This option allows the user to select on a loan by loan basis whether the lender will withhold funds from the loan proceeds in the amount entered to be used to pay property taxes through the Maturity Date of the loan.
The Borrower is required to pay property taxes first and can then seek these funds to be released from the loan servicer.
This is NOT an impound account. Users should select “Are there any tax/insurance or other impounds?” within the Special Loan Features section if they intend on including tax impounds.
This option allows the user to select on a loan by loan basis whether to include an Appraisal Reserve. This is used if the lender is relying on an After Repair Value (ARV), and an appraisal will not be completed prior to loan closing. The reserve funds will be released to the borrower assuming the borrower has obtained an appraisal showing the minimum ARV meets or exceeds the amount determined by the user. If not, Lender may retain the portion of the reserve necessary to keep the ARV ratio below 70%.
This option allows the user to select on a loan by loan basis whether to include a Tenant Improvement Reserve. A Tenant Improvement Reserve (aka TI Reserve) is typically used for commercial real estate loans. It’s money set aside specifically for tenant improvement projects or updates the borrower (as a landlord) is obligated to complete for their tenant.
This option allows the user to select on a loan by loan basis whether the lender will withhold funds from the loan proceeds in the amount entered to be used to pay property insurance through the Maturity Date of the loan. The borrower is required to pay property insurance first and can then seek these funds to be released from the loan servicer.
This is NOT an impound account. Users should select “Are there any tax/insurance or other impounds?” within the Special Loan Features section if they intend on including insurance impounds.
This option allows the user to select on a loan by loan basis whether to include a Default Reserve. In the event that your borrower defaults on the loan, the lender has the right to use the reserved funds to cover the costs of a) making required interest payments, 2) making protective advances, or 3) paying down the principal amount.
Fees
This option allows the user to select on a loan by loan basis whether to include a Termination Fee.
A Termination Fee is similar to an Exit Fee, except the fee is automatically waived if no Event of Default occurs during the loan term and the borrower repays the entire loan at maturity.
This fee is often used to incentivize the borrower to repay the loan and is used in lieu or in addition to charging default interest. The fee may be unenforceable.
This option allows the user to select on a loan by loan basis whether to defer the Broker Fee to be paid at loan maturity instead of at loan origination.
This option allows the user to select on a loan by loan basis whether to defer the Origination Fee to be paid at loan maturity instead of at loan origination.
Special Loan Features
This option allows the user to select on a loan by loan basis whether the loan is an SBA loan with corresponding SBA loan documentation. Additional language and documents are added.
This option allows the user to select on a loan by loan basis whether to include provisions permitting cannabis related activity at the property.
When enabled, this option adds language to the loan agreement which requires borrower to promise to not operate its cannabis related business until it has all applicable licenses or permits.
This option allows the user to select on a loan by loan basis whether to include a new document for the borrower, lender, and property manager to sign which, among other things, requires the property manager to agree that their fees owed by borrower are junior in priority to the borrower’s payments under the loan.
This option is reserved for when the lender and borrower are affiliates of one another. Selecting this feature in the interview will remove instructions to obtain a title policy and all other loan documents (including personal guaranties) other than the Loan Agreement, Note, and Mortgage.
Please consult with the Lightning Docs team before using this option as it eliminates serious protections for the Lender and is not to be used for a customary arms-length transaction.
This option allows the user to select whether a certain property is leased by the borrower rather than owned, meaning the mortgage will be a “Leasehold Mortgage” – that is, the mortgage secures the borrower’s rights under their lease and not the ownership of the property itself.
This is more often used in commercial real estate, or for residential property in certain limited geographic locations where leaseholds are more common.
This selection will add additional language to the loan documents and produce a recommendation for two additional documents: Ground Lease Estoppel and Leasehold Mortgage Agreement. These documents should be executed in advance of closing and must be produced separately. Please contact an attorney for assistance.
This option allows the user to select on a loan by loan basis whether to include a Rental Income Lockbox account in which the rent received by the borrower as the landlord of the property are deposited into an account mutually controlled by the borrower and the lender.
Utilizing this feature will require additional documentation and coordination with the chosen bank.
Once enabled, there are 3 further options: Hard Lockbox, Soft Lockbox, and Springing Lockbox.
UCCs
Collateral Security Agreements are used for securing personal property in addition to the real property as additional collateral.
Equity Pledge Agreements are used for securing ownership interests in a company (typically the borrower) as additional collateral.
Fixture Filings are used to provide additional assurance that personal property affixed to the real estate is secured as collateral as well.
Miscellaneous
Enabling this option allows the user on a loan by loan basis to enter owners of properties who are not going also the borrowers under the loan. For example, if a trust owns the property but the individual trustees are the borrowers. The Non-Borrower Property Owners are liable under the mortgage but not the payment obligations under the loan itself.
Enabling this permission does not enable or disable an actual question in the interview.
Rather, simply having this permission enabled will produce a “Review Checklist” document in the document stack.
This document will show: Governing Law; Arbitration County; Default Rate; Borrower(s) name, address and their signature block; the Security Instrument signature block; the Guarantor(s) name, address, and signature block; and Entity Certificate signature block (if any).
The purpose of this document is to help a QA/QC party to review the documents for accuracy because if any of this information is inaccurate in the checklist it will also be inaccurate in the loan documents.
This option will allow you to select on a loan by loan basis whether the sale and assignment of the loan to an investor is being made as collateral for an underlying obligation between the seller (assignor) and the purchaser (assignee).
This option is typically used when the loan is being assigned to a warehouse lender and the Assignment is not being made as a “true” assignment of the loan but rather solely for collateral purposes.
This option turns on the ability to select between three interest calculation methods: 30/360, Actual/360, and Actual/365.
Normally monthly payments are established by creating a fictitious year of 360 days with even 30-day months. The payments are always the same each month even though there are a different number of actual days in each month. This is considered the standard method to calculate monthly payments. DSCR loans should always use 30/360.
Some bridge lenders prefer to charge a daily interest rate and they can do so in one of two ways:
Actual/360: Instead of dividing the year into 30-day months, this method takes the yearly payment divided by 360 days and charges the daily amount each day so that the payments in a 30-day month are different than a 31-day month. Doing so will charge the borrower 5 extra days of interest each year.
OR
Actual/365: In this method, the annual payment is divided by 365 days and similar to 360/Actual, the monthly payments will change based on how many calendar days are in each month. The actual amount paid over the year is the same as 30/360.
This option allows the user to select on a loan by loan basis whether the lender requires the borrower to be a Special Purpose Entity and to include certain provisions to the loan documents.
When required in the loan documents, this option adds additional events of default if borrower were to make any changes to the entity structure, or enter into certain other contracts.
If the user further selects a “Permit Borrower to use Recycled SPE” then additional language is added as borrower representations about the existence and financial and legal status of the entity.
This option allows the user to select on a loan by loan basis whether to include a Debt Service Coverage Ratio requirement.
For rental properties or other cash flowing real estate, certain mortgage lenders require the borrower to maintain a minimum Debt Service Coverage Ratio for the life of the loan and the failure to maintain this ratio is an Event of Default under the Loan Documents.
Certain documents require initials between paragraphs within the document such as the Loan Agreement, Note, and Mortgage/Deed of Trust.
Other documents require the borrower complete the document in their own handwriting such as the Certificate of Non-Owner Occupancy, Business Purpose Certificate, and Language Capacity Declaration.
Enabling this feature will permit the user on a loan by loan basis to insert a coverpage to these documents alerting the notary that these documents cannot just be signed but additional entries in the documents must be done.
This option allows the user to select on a loan by loan basis whether to include a separate “Borrower Certification and Authorization” form.
This document requires the borrower to certify that they understand lender may verify any information provided to it. Lender can share this information with third parties including investors. The borrower also authorizes the sharing of this information and to receive phone, text, and email communications.
This option will allow you to select on a loan by loan basis whether to include a Loan Subordination Agreement / Intercreditor Agreement.
A loan subordination/intercreditor agreement is used when there are multiple loans secured by the same property and the lenders choose to enter into an agreement confirming their rights between each other.
You may further choose between language types that are either more friendly to a senior lender or more friendly to a junior lender.
A Shtar Iska/Heter Iska is a Jewish religious compliance document that allows lenders and borrowers who are both Jewish to comply with Jewish law that prohibits the payment and acceptance of interest on loans between Jewish people.
This option allows you to select on a loan-by-loan basis whether to include this form.
If the loan includes a construction holdback and the user includes a guaranty as part of the interview, construction completion requirements automatically populate in the personal guaranty for that guarantor.
This option is only to be used when a THIRD PARTY to the transaction (i.e. someone other than any guarantors) are also obligated to complete construction at the property.
An additional stand-alone guaranty of completion will be produced for that third party.
This option allows the user to select on a loan by loan basis whether to include a First Payment Letter – an additional and separate document which specifies the amount of the very first payment on the loan and the date of which monthly payments begin.
This feature is often used for DSCR loans when the lender would like to include references to tax and insurance impounds in addition to the principal and interest payments.
This option will allow you to select on a loan by loan basis whether to include an automatic extension of the maturity date.
There can only be one (1) automatic extension, but the length of the extension, the fee charged (if any), and the increase in the interest rate (if any) may be determined by the user. When used in connection with a variable interest rate, new intereset rate specified (if any) will replace the MARGIN percentage. When used in connection with a Step-Up interest rate, the new interest rate (if any) will replace the then-current rate.
This automatic extension feature is not compatible with the Bridge to Perm feature.
A line of credit provides the borrower an ability to borrow up to a certain amount of funds based on certain conditions provided in the loan documents. The borrower is only charged interest on the funds the borrower receives under the loan.
Enabling this feature allows the user to select on a loan-by-loan basis to utilize line of credit documentation rather than a closed end loan with a fixed amount advanced at closing.
This feature enables the user to select on a loan by loan basis whether the borrower’s interest-only payments can be deferred for the term of the loan. This feature also allows the user to select whether the deferred payments should compound or capitalize.
Enabling this permission will show “Will the interest rate automatically increase during the loan term (Step Up)?” in the loan interview under the Standard Loan Terms page. Users will determine on a loan-by-loan basis whether to use this feature if enabled.
The feature is used when a lender would like the interest rate to change after a fixed time period during the loan and the lender knows the exact rate they would like the Note to change to (i.e. from 6% fixed to 9% fixed after 3 months).
Note that even with this permission on, interest rate step is still incompatible with variable rate loans, and will thus be hidden in the interview if variable rate is selected.
Normally a borrower would first take out a Bridge/Fix and Flip/Construction loan, then stabilize the property and complete any construction.
Once the property is stabilized, typically with a tenant in place, that same borrower typically seeks permanent lower cost financing usually through the form of a DSCR loan.
This feature combines both loan features into a single loan. An initial bridge loan which is interest-only, and typically contains a construction period, which then automatically converts to a 30 year perm loan.
Enabling this feature allows the user to select on a loan-by-loan basis to utilize line of credit documentation rather than a closed end loan with a fixed amount advanced at closing.