What Are First Position Commercial Mortgages?

Barry Kornfeld pic

Barry Kornfeld
Image: fftaxgroup.us

The co-founder of the First Financial Tax Group, financial advisor Barry M. Kornfeld provides alternative income and growth strategies for conservative clients. Over the course of his career, Barry Kornfeld has gained significant experience with first position commercial mortgages (FPCMs).

First position commercial mortgage (FPCM) notes are an appealing option for those seeking a lower risk, fixed-income vehicle. Offering a stable 6% return with monthly payments, these one-year bridge loans are secured by a commercial property, such as an apartment or office building, or other commercial real estate structure. Importantly, the real estate value at closing will be substantially more than the total FPCM loan value, creating high-value collateral value and security for the FPCM holder.

When a client utilizes an FPCM note, he or she becomes the senior lien holder for the property and has his or her name listed first on the title, hence, the term “first position.” Clients often purchase FPCMs using a variety of funding sources, including IRA’s, pensions, trusts, and 401Ks. Since these FPCMs have a low loan-to-value ratio, averaging between 30% and 65%, or even less, it means that the client has a more secure and safer alternative to generate the highly coveted monthly income that so many seek in today’s yield starved economy.

Some Distinctive Facts about First Position Commercial Mortgages

First Financial Tax Group  pic

First Financial Tax Group
Image: fftaxgroup.us

Financial advisor Barry M. Kornfeld is co-founder of First Financial Tax Group (FFTG), a tax and income planning firm based in Florida. Barry Kornfeld’s group offers clients a safer fixed income alternative through First Position Commercial Mortgage notes (FPCMs), a real estate collateralized bridge loan.

FPCMs have first lien status on the commercial property securing the loan, thus the lender has a greater measure using the hard asset value backing the loan. Also, the specialty mortgage company that Kornfeld’s firm partners with, is considered the industry leader, and they take a second position, in every transaction, that is subordinate to all FPCMs. In other words, they have their own skin in the game, but they cannot get their funds (skin) out, until all of the FPCM funds have been returned, with interest.

In fact, the firm the originates the FPCMs will, in fact, contractually obligate itself to make payments to all FPCMs lenders, even if the underlying property borrowers defaults, and doesn’t pay them. They will do this because the high-value real estate supports the loans, and because it protects their second interest. What this means to FPCM clients is a more secure, and safer experience, from start to finish.