The preliminary leverage calculation for a foreclosure rescue is simple: divide the complete closing need by the supportable current value. What makes the work difficult is deciding which number belongs in the numerator and which value can reasonably be used in the denominator.
Build the numerator from the closing table
Start with the senior lender's good-through payoff, not the last principal balance. Add the per diem through the expected closing date, recorded liens that must be resolved, delinquent taxes, municipal charges, approved legal and receiver expenses, required reserves, and ordinary closing costs. Subtract only contributions that are documented and available for closing.
| Closing need | Amount |
|---|---|
| Senior lender payoff through closing | $840,000 |
| Property taxes and municipal charges | $42,000 |
| Junior lien to be released | $78,000 |
| Title, appraisal, legal, and closing estimate | $30,000 |
| Total preliminary need | $990,000 |
Use present-condition value
The denominator should reflect the property as it sits today. An appraisal based on stabilized occupancy after renovations is useful for an exit discussion, but it is not automatically the value supporting the rescue loan. Reviewers will look at condition, occupancy, leases, collections, comparable sales, environmental or zoning issues, and the time required to sell the asset.
What the screen does not tell you
Meeting a 75% preliminary screen does not establish approval. Title may reveal another claim. The appraisal may be subject to repairs. A receiver or bankruptcy court may control the property or borrowing decision. The exit may depend on assumptions that cannot be achieved within the requested term. The screen tells the desk whether the file deserves deeper work; it does not replace that work.
Items that commonly move the LTV
- Default interest and legal fees added after the last borrower statement
- A stale appraisal that assumes better occupancy or condition
- Taxes, judgments, municipal charges, or junior liens omitted from the request
- Broker fees and transfer costs needed for a planned sale exit
- Documented cash contribution available at closing
- A partial release, negotiated payoff, or lien subordination that is actually in writing
Is 75% the final approved LTV?
No. It is a preliminary program screen. Final leverage depends on verified value, the closing statement, title, property condition, legal authority, and the complete underwriting decision.
Can future renovated value be used?
It may help explain the exit, but the rescue review also needs a defensible present-condition value. Whether any future value receives credit depends on the structure and evidence.
Does borrower cash reduce LTV?
A verified contribution that will be available at closing can reduce the requested proceeds. A proposed contribution without evidence should not be netted from the need.
Sources and authorities
Always confirm current authority and the rules of the applicable jurisdiction.
- Prudent Commercial Real Estate Loan Accommodations and Workouts — Federal Reserve, FDIC, NCUA and OCC
Qualified Commercial Underwriting Desk
Credit and capital markets
The Qualified Commercial underwriting desk reviews commercial real estate, dealer and Main Street files daily. The Academy is written from that work (how files are actually read, priced and declined) rather than from a rate sheet.
Educational content only. Nothing here is a commitment to lend, an offer of credit, or tax, legal or accounting advice. Program terms, timelines and thresholds vary by lender, file and market conditions, and any figures shown are illustrative.