loan subordination letter
to Construction Loan Document Overview
Notice to Subordinator
Re: Escrow ######
Dear subordinator ,
I have tentatively approved a $###,###.## first loan
for borrower on
the property located at address to finance a portion of
the funds necessary to construct a #### square foot home.
Much of the money will be "doled" out in predefined draws as the work progresses,
as per the attached sample loan draw agreement. We do not have a voucher system.
I'm sure that you are a cautious investor, however I feel it my responsibility
to take this time to repeat that subordination can be risky. If we are forced
to file a Notice of Default against this borrower at any time, the balance of
any remaining construction funds held could be used as a principal payment to
reduce our loan balance. In that case, the remainder of our loan as well as any
interest due, accumulated late fees, default fees, etc., will stay against the
property in first position ahead of your loan. If the borrower fails to cure
a default, you as the junior lien holder, in order to foreclose and protect your
interest, would need to assume full responsibility for our loan.
Also, in order to qualify for and obtain this construction loan from Brad
Evans Real Estate Loans (funded by private investors) the borrower is not obliged
to meet the criteria a bank or other conventional lender would require. The subject
loan was approved primarily on the real estate equity, all or part of which in
this case is being provided by you.
P.S. For more information on this topic take a look at "What the Heck is Subordination"