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Q: What is important to know when closing on a deal with multiple financing layers?
A: It is quite common for multifamily rehabilitation projects located in urban areas to be financed with one or more layers of subordinate debt.
The subordinate debt may 1) encumber the project with second or third mortgages, 2) require an assignment of partnership interest as collatoral, or 3) simply be unsecured.
It is important to have an individual who is the transaction quarterback, regardless of the subsidy layering arrangements. The transaction quarterback may be a mortgage banker or an attorney who understands the loan terms and closing requirements of each lender.
It is the job of the transaction quarterback to create a checklist that caters to the requirements of each lender, after each lender has issued its loan committment or once the lenders have executed an inter-creditor agreement. The quarterback must ensure via fax or e-mail that each lender, legal counsel, and the escrow agent know how things are progressing towards closing and how each of their specific requirements are being met.
By this time all of the survey and title issues should have been identified and resolved.
Settlement statement numbers should be presented to the property owner as soon as possible prior to closing, and this is also part of the transaction quarterback's job.
To ensure that wire cut-off times are met, the transaction quarterback will also have intense communication with the lender who is wiring the funds for the new loan in addition to the lender who is receiving payoff funds.
Whoever your transaction quarterback may be, it is important that this individual is not bashful about making each party to the transaction accountable for their specific area of expertise and contribution to the financing.
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