Hard-money mortgage lender raises $10M in public offering

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Sachem Capital Corp., a hard-money mortgage lender that makes short-term loans to investors, raised $10 million in gross proceeds from a public offering of 2 million common shares last Friday.

The public offering price was $5 per share. Sachem took in $9.5 million in net proceeds after payment of underwriting discounts and commission, and before other transaction expenses.

The company's stock was trading slightly below $5 per share shortly before noon on Monday.

Sachem originates, underwrites, funds, services and manages loans secured by mortgage liens on non-owner-occupied residential or commercial real estate. These loans are exempt from federal ability-to-repay requirements that owner-occupied, single-family loans are subject to.

Borrowers include real estate investors and developers who use the loans to fund the acquisition, renovation or development of properties. The company's primary underwriting guideline is its loan-to-value ratio.

Sachem's maximum LTV is 70%, according to an investor presentation from late 2018. Residential mortgages comprised an estimated two-thirds of its lending in the past year.

Loan sizes range from $6,000 to $2 million, with the maximum amount not to exceed 10% of a borrower's portfolio. Fixed interest rates range from a discount rate of 5% to 12.5%, with a default rate of 18%. Interest is due monthly with principal payable at maturity. The company does not change prepayment penalties.

The financed properties are primarily in Connecticut, where the company is based, but it also lends in Massachusetts, Rhode Island and New York.

While hard-money lenders are less regulated at the federal level than companies in the owner-occupied mortgage business, a handful of them faced some state-level scrutiny based on alleged ability-to-repay concerns in 2014, when Benjamin Lawsky was New York's superintendent of financial services.

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