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Constructive Loans: Re-Inventing Wholesale Lending for the Residential Investor Loan Market

Insights» Leadership

August 1, 2021by Originate Report Team

Read the full Originate Report August edition here.

The overarching goal for the Constructive Loans team has been to construct (pun intended) an innovative conduit that provides their clients with simple and efficient access to capital for business purpose mortgage loans. Additionally, the team at Constructive has worked tirelessly to forge productive, long-lasting relationships with their partners to help them expand product offerings and increase their market presence. This unapparelled level of collaboration has allowed Constructive to build a network of partners that continues to grow at a break-neck pace.

Constructive’s leadership team has leveraged its decades of combined multi-industry experience to revolutionize the private lending space. Constructive has pioneered a wholesale lending strategy that simplifies lending, reduces overhead, and mitigates significant risks for their private and conventional lender clients.

Geraci LLP recently had the opportunity to speak with Alex Offutt, Managing Director of the Wholesale Division of Constructive Loans, to gain better insight into the unique qualities that set Constructive apart.

“The team at Constructive recognized early on that there was a large constituency that was vastly under-served in the marketplace,” said Offutt. “Many of these smaller to mid-sized lenders had no other option but to work with slightly larger lenders that had direct access to capital. This “daisy-chain” of capital was (and still is) cumbersome and costly to the individual real estate investors who form the foundation of our industry.”

While there are other capital providers in the Business Purpose Loan (BPL) industry, they primarily purchase closed loans, a strategy which predominantly benefits larger, more established lenders and brokers. In order to sell a closed loan, a lender must process, underwrite, close, fund, and then sell that loan. This is an operationally and cost intensive endeavor, as you need highly specialized employees to carry out these tasks, and those employees don’t come cheap in this market. Additionally, once closed, there are carrying costs that come with holding a 30-year loan on a balance sheet.  It’s also important to recognize the most likely significant risks, the inability to sell a loan and/or requirement to re-purchase a previously sold loan. Remember the disastrous events in early 2020 that left many originators with loans they were unable to sell and then eventually sold for a significant loss?

Constructive’s approach is to provide all the necessary tools to its partners to operate independently. They provide the underwriting, the loan documents, and the capital to fund the loan, thus eliminating the operational expense and many of the risks associated with the origination of a business purpose loan. Furthermore, Constructive delivers this product through a streamlined and fully transparent operational process that closes loans on average in 10-14 days and has closed loans in as little as 3 days.

Pre-COVID, the population of loans Constructive funded for their partners represented a broad array of BPL offerings. However, since May of 2020, more than 80% of their loans have been Long Term DSCR Rental loans, which are 30-year mortgages. Constructive has seen double digit growth in this rental product class every month for the last 12 months, and expects to continue that trend well into 2022.

It’s certainly a tall order to maintain this level of growth and superior performance, but Constructive has excelled where many have faltered. With an eye towards the future, they have invested significantly in their future by continuing to invest in new technology. Constructive expects to release enhanced tools for its partners towards the end of this year.

If you’re interested in partnering with Constructive Loans and learning how their product offerings can help you further build out your lending business, get in touch with them by emailing Alex Offutt at aoffutt@constructiveloans.com or visiting their website: www.constructiveloans.com or via phone: (833) 250-7634.