The recent failures of AIG and Corus Bank have
demonstrated that conventional credit enhancement and/or insurance
strategies have proven to be unreliable in many cases.
In the case of AIG, financial institutions were relying on the
strength of one company's balance sheet. Corus Bank provided
construction financing on development projects based on a 50%
presale criteria from individual purchasers. In both cases, the
strategies failed.
Our credit enhancement strategy has proven through the credit
crisis to be a reliable and effective means for the lending
institution.
The strategy ensures repayment of the construction loan upon
project completion, regardless of market conditions.
In lieu of one balance sheet or unknown purchasers, our strategy
provides pre-approved and qualified individual purchasers who are
willing to provide up to a 30% non-refundable deposit on each
respective unit and up to 100% of a project's units, if
required.
This mechanism, alongside your equity, provides lending
institutions with the financial reassurances to be reimbursed in
any market condition.
The high deposit amount and your equity contribution coupled
with the use of individual purchasers and the 100% presale
requirement provides lending institutions with a unique and
dependable method of being insured.
We conventionally require that the deposits be held in escrow
with the lending institution to contribute to the lending
institution's deposit base*. Unlike the conventional institutional
synthetic credit enhancement facility that solely serves as an
insurance policy, our credit enhancement facility provides the
lending institution with an immediate increase in deposits, further
reducing the lender's risk and potentially increasing
profitability.
For more information on BridgePoint's credit
enhancement facilities click here