Private money lenders who are new PeerStreet partners sometimes hear through the grapevine about other lenders who get their loans funded even faster than the five to seven days it generally takes PeerStreet to evaluate and purchase a loan.
The rumor is true: Under ideal conditions, it is possible for PeerStreet to fund a loan in as little as two days.
When funding speed is your primary goal—and even when it’s not—it’s important to remember that you have two options for the loans you submit for purchase:
- Loans you’ve already originated that PeerStreet buys from your portfolio.
- Loans funded into origination (FIO) — transmitting funds directly to close a transaction.
Some of the same principles apply to both types of funding, but there are also significant differences. To make things as clear as we can, we’ll look at them separately.
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Part 1: Loans You’ve Already Issued
You’ll have the best chance of getting your loan funded in two days if you’re selling an existing loan to PeerStreet. It’s the simpler of PeerStreet’s two major categories of loan, in that it involves just two parties—PeerStreet and you, the loan originator.
Because the loan has already been made, all of the necessary documents, reports, and background checks should be available to upload as a complete loan file. When you upload all required documentation at once, it speeds up PeerStreet’s evaluation considerably—allowing the underwriting team to process the entire package at the same time.
Where this gets complicated is when you ask your borrowers for fewer documents, reports, or checks than PeerStreet requires to consider a loan.
We often get paperwork that’s missing one crucial piece of data or another. It usually doesn’t prevent us from buying the loan, but it does mean that we have to ask you for additional information. That kind of back and forth makes it nearly impossible to fund a loan in two days.
So here are four tips to keep you on course before you submit an application.
Tip #1: Research (and Explain) Your Borrower’s Credit and Background
No matter the value of a property, we’ll need some basic information about your borrower, including FICO score and a background check that will uncover any past criminal or fraud charges, as well as any outstanding liens and lawsuits. To speed things along, you’ll want to include a FICO score, background check, and a letter of explanation if the FICO score is less than 650 (for most loans).
As a supplement, our analysts will use public record and internet searches to scan for red flags. You should do the same ahead of time.
Tip #2: Include Two Valuations
We always require a third-party attestation of value on a loan, and we make a list of PeerStreet-approved assessors available to our lending partners. But our loan originators are generally experts in their local markets, and we also look to make sure that their own valuation is included in their application.
A third-party vendor may not grasp the subtleties of your particular real estate environment. So when it comes to evaluating property value, we consider both opinions. That way, we can mediate any difference between the Broker Price Opinion (BPO) of the property value and that of the third-party assessor for Residential loans (SFR, 1-3 units).
Note: You’ll typically need a more formal valuation for commercial and multifamily loans.
Tip #3: Remove the “General Exception Clause” in Title Insurance
Title insurance commitments and reports typically include a “general exception” clause, which exposes the loan holder to increased risk by giving the insurance company a wide variety of reasons not to cover a loan.
To limit that possibility, we require title insurance to enumerate all exceptions and remove general exceptions completely. In place of a phrase like “all easements of record,” for instance, we’ll request that title substitute that language for language that’s narrowly specific. Something like: “the easement recorded on 1/2/18, book 2, page 5.”
That leaves little leeway for an insurance company to deny a claim in the event that something doesn’t pan out quite as predicted—helping to protect you, PeerStreet, and your investors.
Tip #4: Make Sure the Right Person Has Signed the Loan
Our lending partners often do business with non-individuals, LLCs, and other corporate entities, which have rules governing who can transact business on their behalf. High on our legal team’s list, prior to final approval and close, is to check whether the capacity/title that the person designated to do business on behalf of the entity—e.g. president, CEO, secretary, manager—on the loan paperwork matches the corporate entity documents.
When those names turn out to be different, the result, inevitably, is a lag in the deal. When you’re dealing with a corporate entity, make sure to work with your borrower to ensure that the right name appears on the loan documents.
Part 2: Loans Funded Into Origination by PeerStreet
When you prefer to have PeerStreet fund a loan into origination, much of the same rules apply as when you’re selling a loan that you’ve already issued yourself. But the process is much more complex. With more parties, more documents, and more variables in play, there are more opportunities to hit snags and slowdowns. (In some states Table Funding is preferred, and is operationally similar to FIO).
Below, we outline what to keep in mind in order to get your loan funded into origination as quickly as possible (should it get approved)—and how to avoid areas where we often see delays.
But one overarching principle should help keep you headed (swiftly) in the right direction: Treat these deals the same way you would if you were funding the loan yourself.
- Act as an attentive shepherd throughout the process.
- Make sure that your application includes all of the information you would want if you were going to put your own money into the deal.
Tip #1: Have Your Documents In Order
PeerStreet provides its lending partners with a standard list of the minimum documents we require in order to consider funding a loan into origination. Our lenders are pretty good about checking off the items on the list and including them in their applications. But oddly enough, one document that often causes delays is the title report.
PeerStreet requires a full chain of title, or long-form title report, in order to complete a loan evaluation. A lending partner might submit an otherwise-perfect application, but if they include a short-form or preliminary title report with general exceptions, rather than the long-form version, we’ll have to go back to them for further documentation. This is a common cause of delay in funding loans into origination.
Tip #2: Tell Us the Whole Story
The application documents that PeerStreet requires often paint only part of the picture we need to see in order to evaluate and fund a loan. If you leave those areas of the canvas empty, we’ll have to come back to you for more information, causing—you guessed it—delays.
Another common source of questions for us are loans in which the purchase price of a property appears to be significantly lower than the as-is value. Does the buyer have a relationship with the seller that clears up the discrepancy? Did the deal come from a pocket listing? Ask your borrower to explain things to you, so that you can tell us up front, and we can work to keep your loan evaluation moving along quickly.
These are just two of many possible examples. If before submitting your application you review it and find gaps in the story behind your borrower’s loan, you probably have some more digging to do before you’re ready to send the application on to PeerStreet.
Tip #3: Keep Everyone in the Loop
Funding a loan into origination involves coordinating numerous parties and stakeholders—the borrower, the lending partner, the seller, agents, closing attorneys, and brokers—most of whom operate outside of PeerStreet’s purview.
Getting a loan funded—and a deal closed—efficiently requires keeping everyone on the same page, and maintaining open lines of communication. That includes the title company and escrow agency, which should be included in the process as early as possible and kept in the loop throughout.
Tip #4: Have the Right Signer On Hand
When you’re selling an existing loan (or making that loan in the first place), you need to double check that the name on the signature page is the right one. But when you’re making a loan funded into origination, you need to be sure that the person who’s eligible to sign the loan documents is the one doing the signing.
This sounds simple enough. But sometimes, especially when the borrower is a corporate entity rather than an individual, this check gets overlooked. Not infrequently, we run into situations where we have to stop the FIO loan, or the underwriting process, to figure out who the signatory really should be.
If you’re dealing with a corporate entity, before going any further, work with your borrower to get the entity documentation to identify the person who has the authority to sign on behalf of the entity. Sometimes it’s the most trivial issues that cause the most frustrating delays.
Understand PeerStreet’s Typical Underwriting Process Is Still 15 Business Days
We know that speed is essential, which is why—when possible—we approve loans for purchase or for origination funding in less than our standard five to seven business days.
With that said, we still recommend you plan for fifteen business days for full processing of a loan you submit to PeerStreet.
If you’re already a PeerStreet-approved lender, your PeerStreet relationship manager has a wealth of knowledge about our process requirements. Don’t hesitate to reach out if you have any questions.
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