The Procedure

The first target in the international mortgage financing process is to succeed in getting the approval of a mortgage banker. To this target are devoted all our efforts in the first phase of the process. Once achieved the approval of a mortgage banker we have to secure the funding necessary to release the loan. We do this by packing the loan project and securitizing it. For a number of operational reasons the success of this phase is subject to the achievement of a minimum securitized loans package of approximately USD 15 millions. This may be achieved with a single loan or by packing together various lower loans. Once achieved the sufficient size the package format, which was already prepared, is completed and placed in the market, usually to funds or private investors with which we and/or the mortgage banker have long standing relations. The packaging of the loan usually requires some undertakings from the Client, such as: a suitable collateral guarantee for the construction period (this may be existing real estate, financial assets or a performance insurance), the obligation to make a global insurance for the building once ready, the payment of the "origination fees" to be determined case by case...
By selling the securitized loan (which is like a bond) the Mortgage Banker collects the necessary funding. At this stage the financing is ready to be released and an appropriate structure is built up to channel the financing to the project. The structure must take in account the funding procedure and keep safe the guarantees and all the other legal aspects. This structure may vary according to the country where the project will be developed and to a number of other issues. A quite common structure is made by creating a local special purpose company which holds the mortgage rights, all the guarantees and any other benefit (insurances etc...) together with all the liabilities and contractual responsibilities. This company is then capitalized with the funding collected and re-pass it to the project.
Once received the financing the Client must comply with the project chronogram. Usually the money, even if already fully available, is released from the financing structure to the Client according with the timing determined in the project. During this construction period the collateral guarantees will be held or performance insurance will be active. Once concluded the construction project it will become the loan guarantee, in the form of a mortgage, and all other guarantees will be released. From this moment the Client will have to make a global insurance to protect the estate from any risk that may affect its value and consequently the guarantee offered.
Due to the securitized format of the loan, interests must be paid once a year (at end of year period). There is no chance to have a grace period for interests, this means that the Client will have to pay the first interests at the end of the first year. The principal capital must be paid 100% at the end of the loan period. Interests usually range between 7% and 10% a year, depending on many issues.

Steps

A typical financing process happens as follows:

a) The Client sends a full business plan, including shares of the realty already placed, commercial forecast, full company information and balance sheets, authorities approval, collateral guarantees available etc.

b) IRMF Corp. checks the documents and if potentially financiable, formats this information, with the Client's support, and presents the project to a Mortgage Banker.

c) The Mortgage Banker analyses it and approves (or not) the operation in principle.

d) The Client provides a suitable collateral guarantee or a performance insurance together with any other information, needed. The Client also pays the “origination fees”, to start the loan packaging and securitization process. If necessary and if provided by our company, the performance insurance usually costs an additional 1% to 1,5% a year and is due only for the period necessary to complete the construction.

e) Depending on the size of the project and on the availability of other projects to be packaged together, when the loan package reach a sufficient size (around USD 15 millions) it is securitized and placed in the market (for funding), usually with funds or private investors with long standing relationship with our company or with the mortgage banker.

f) Once the funding is collected (by the Mortgage Banker) it is passed to the Client, this process can happen in a number of different ways depending on the country in which the project is based and on various other aspects. A common way for this to happen is to create a local special purpose company which is capitalized with the funding collected and then holds all the guarantees and liabilities of the business (including as beneficiary of the global insurance to be made by the Client).