4 ms·
Owners frequently have loan covenants that mandate bank approval for rents below a threshold. You've securitized the cashflow from the property, so if that cas
by rokkitmensch 3y ago
Owners frequently have loan covenants that mandate bank approval for rents below a threshold.
You've securitized the cashflow from the property, so if that cashflow dips, the lender has an assurance they can reprice the security in line with your new cashflow story.
Even if you cover the shortfall in cashflow out of pocket, this is better for both you and the bank because you don't have to admit that the market rates at which you got your loan have changed.
- hiAndrewQuinn 3y agoOh, okay. So you've been offered a loan partly _on the basis_ of that future cashflow, and probably wouldn't have been able to get one on equally good terms if it was "just" to build a building? Yeah. I can see how that would create perverse incentives downstream.
- rokkitmensch 3y agoSame reason no working schmucks go to their mortgage servicer when they lose a job. They don't even want to know!