Advantages of First Position Commercial Mortgage Notes

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Barry Kornfeld
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Barry Kornfeld offers fixed income alternatives to clients seeking safer means of generating additional income. As a financial advisor, Barry Kornfeld focuses on First Position Commercial Mortgage Notes, or FPCMs. These notes are a type of commercial mortgage loan that is secured by tangible assets, and generally has a advantageous annual percentage yield.

Clients approach financial advisors who handle FPCMs to lend their money to firms that specialize in the short-term notes. These firms, together with third-party companies, identify commercial property owners qualified for these bridge loans. FPCMs are different from other fixed income alternatives in several key ways. Here are some of their advantages:

1. High yield over a short term – The lender’s money is locked in for only one year at a time, but he or she will still enjoy at least a 6% annual, fixed percentage yield, that is paid out monthly.

2. Security – FPCM firms structure the security of notes by ensuring that lenders have first-lien position and using the property’s equity as collateral. The value of the property is always more than the value of the loan.

3. Monthly interest payments – FPCM notes offer lenders monthly interest payments, regardless of the underlying commercial property owner’s borrower’s ability to meet payment obligations. The FPCM’s originator is contractually obligated to pay both interest and principal.

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