Looking for Multi-family Lender - No Lien Available

[Lucas Vaughn]

I am a partner in a large (470+ units) multi-family deal in Houston. We are currently looking for a lender that would be able to write a loan without taking a lien on the property. (Gasp!) Here's the story:

We bought the property in 2008 with a 10 year Fannie Mae loan and a 2 year bridge loan. The plan was to repair the property, get it performing, then refinance and pull our cash out, as had been done many times before. We completed the rehab, put a management team and systems in place, and got the property performing. However, the market dropped out and the refinance option was no longer available.

We were able to renew the short term loan a few times until the middle of last year. That's when the lender called that note. We had thirty days to pay or else face foreclosure. Fortunately, someone loaned us the money to pay off the bridge loan (hard money, so to speak). However, the loan terms are less than favorable, to say the least. We are now looking for a loan with better terms.

Fannie Mae is the first lien holder on the property. The terms of that loan do not allow for any other liens to be made against the property, which is why I titled the post "No Lien Available." Further, the Fannie Mae loan has an extremely large prepayment penalty in place for another two years, so it doesn't make sense to pay off the loan and makes it difficult to sell the property, as a buyer would have to assume the current Fannie Mae loan, which is at a higher rate than current market.

My questions are:

1) Does anyone have a recommendation for a lender that may work with this type of situation so we can payoff the hard money loan? We are looking for a loan amount of $3.5 million for a 2 year term. The exit strategy would be to either sell or refinance at the end of the two years.

2) Does anyone have any experience with Fannie Mae prepayment penalties? If so, is there any way to pay off the note without incurring the penalty?

3) Does anyone have any suggestions on an exit strategy? We will sell if the right buyer comes along, but that hasn't happened yet.

Thank you!