Fulcrum Lending was recently featured in Commercial Mortgage Alert. The following is the excerpt from the publication:
Fulcrum Lending is planning to buy and originate small-balance and middle-market loans as it works to launch a Freddie Mac Q securitization program series early next year.
The firm aims to amass $500 million of such debt by yearend, with individual loans ranging from $10 million to $30 million. To do that, New York-based Fulcrum is offering incentives to rival lenders and borrowers.
While participation in Freddie’s Q program historically has been limited to traditional banks, the agency has expressed a willingness to welcome others, including bridge lenders. Freddie already has vetted Fulcrum’s program, so its focus now is to accumulate the initial collateral and then maintain that loan flow to establish a programmatic series.
“We are laser-focused on loan originations for the next three months,” said chief investment officer Richard Le, who joined the firm earlier this year and is leading the Q program effort. “We have the capital committed, and now we are looking to execute deals. We will use a multi-prong approach to fill our bucket.”
The executive noted that Fulcrum’s focus on fully or mostly stabilized multifamily properties makes the firm a good fit for the Q program. Le also has more than two decades of experience working as an underwriter, with earlier stints at Liberty Mutual Investments, AEW Capital Management, KKR and LNR Property.
Fulcrum aims to take advantage of the relatively inexpensive financing offered through the Q program — Freddie provides an implicit government guarantee to a large part of each deal — to grow its business.
The firm anticipates splitting loans into A notes that will qualify for the stricter standards Freddie requires in the Q program — with loan-to-value ratios hovering around 55% — and B notes that will bring those ratios as high as 80%. It plans to hold the B notes on balance sheet.
To ramp up its production, Fulcrum is offering to purchase loans that meet its underwriting guidelines at par. It’s also willing to work with correspondent lenders and plans to incentivize them by offering to purchase A notes or sharing the economics on a deal.
“A lot of lenders leverage their loans by selling off A notes, while retaining the higher-yielding B notes,” Le said. “We want to be their solution provider.” Le, who’s based in Boston, said Fulcrum’s access to relatively inexpensive capital from banks and insurers will give it a leg up on rival bridge lenders. To compete with CMBS and agency lenders, it plans to offer borrowers more flexible prepayment options and higher proceeds.
Unlike bridge lenders, which began tapping the Q program in late 2022, Fulcrum offers only fixed-rate loans backed by largely stabilized assets. While it does occasionally lend on properties that are not fully leased, the firm will require interest-rate reserves to ensure borrowers can make their payments. Fulcrum was founded in 2021 by chief executive Maxwell Wu, who has a technology and real estate background, and chief technology officer Kenneth Mendonca. The firm uses proprietary software to speed the underwriting and closing process.
