Settlement about to fall over

The scenario

A contracted property settlement is in jeopardy. The most common pattern is a bank refinance not approving on the assumed timeline. Other patterns: a panel valuation coming back short, a deposit shortfall surfacing late, or a documentation issue holding the file at the bank's compliance desk. The settlement date is approaching and the path forward is unclear.

Why the bank cannot solve it

The bank is already on the file and not landing fast enough. Even if the original problem can be resolved, the remaining time before settlement is shorter than the bank process needs. Extension or re-paper at the bank end is often slower than starting fresh with a private facility.

How a private lender approaches the file

The credit team treats the rescue as a discrete file rather than as an extension of the bank's position. Security, sponsor, exit. Where the underlying file is genuinely workable, a short-dated private facility can close the gap and the exit can be the bank refinance once the original constraint resolves. Where the underlying file is not workable, no amount of rescue funding solves it; honest early advice matters.

Indicative file structure

• Security: registered first or second mortgage on the contracted property or another asset.
• Term: sized to the realistic resolution pathway plus contingency.
• Exit: bank refinance once the original constraint is resolved, sale, or asset disposal.

What credit will ask for

• Contract of sale and any extension correspondence.
• Bank's current position: decline, conditional approval, valuation result, whatever has been communicated.
• Standard identification and supporting financials.
• Realistic plan for resolving the original constraint and the time it will take.

Key risks

The dominant risk is that the original constraint does not resolve and the rescue file cannot exit. The credit team looks hard at whether the planned exit is realistic; borrowers should be honest with the broker about what is actually happening at the bank end. Property-secured lending carries the risk of loss of the security on default.

Frequently asked

• Can a private lender save a settlement at the last minute?
  Often yes, if the underlying file is workable. The credit team can issue indicative terms same-day and move to settlement quickly on a clean structure. The key is reaching credit early enough; a scenario landing 48 hours before settlement is harder than one landing two weeks out.
• What causes a settlement to start falling over?
  Most often: a bank refinance not approving on the assumed timeline, valuation coming back below contract price, a deposit shortfall, or a documentation issue that pushes the file past the unconditional date. Each has different rescue paths.
• Will the lender step in if the bank has formally declined?
  Possible but harder. The credit team will read the bank decline, the security, the sponsor and the exit. A policy decline with strong fundamentals is workable; a credit-quality decline is much tougher.
• How is rescue funding sized?
  To the gap between the settlement obligation and what the borrower can fund from other sources. The credit team underwrites the new structure as a discrete file: security, exit, term, pricing. The rescue is solving the cashflow, not papering over the underlying credit position.
• What is the typical exit on a rescue file?
  Bank refinance once the original constraint is resolved, sale of the security or another asset, or completion of the original transaction once the gap closes. The exit is documented at submission, the same as on any private lending file.