The co-owner of First Financial Tax Group, financial advisor Barry M. Kornfeld is an alumnus of American University in Washington, D.C. In his professional life, Barry Kornfeld focuses on assisting his clients plan for retirement and is experienced in facilitating first position commercial mortgage notes (FPCMs).
Listed below are three frequently-asked questions about FPCMs.
1. What does “first position” mean?
When a client chooses an FPCM, he or she is taking out a third-party loan backed by a piece of commercial real estate property to accrue interest on a monthly basis. The first position refers to the fact that the person who is issued the FPCM retains priority over any other claimants or liens that could befall the property if it should default. Mr. Kornfeld and his team further insulate their clients from this event by using an industry leading specialty mortgage company that contractually obligates itself to make payments to the FPCM 1-year note holder, even in the event of borrower distress. They will do this to protect their own 2nd interest, which is subordinate to our own 1st position status.
2. What kind of properties are used in a first position commercial mortgage?
The real estate involved in an FPCM can be one of many different types of commercial properties, including retail buildings, mixed-use developments, offices, or even apartment complexes. Commercial property assets are generally recognized as more stable forms of lender collateral.
3. What is the fixed rate for an FPCM?
First position commercial mortgage rates typically start at 6 percent, and can escalate from there, depending on the level of one’s commitment. FPCM clients enjoy monthly interest payments over the course of a one-year loan term, with a full return of principal paid also at maturity.