In Episode #10 of the Private Lending Insights Podcast, I interviewed Kevin Kim, securities attorney and partner at Fortra Law, to get an update on private mortgage funds and the secondary market for private lending in early 2025. We talked about what he’s seeing with capital raising for debt funds and capital markets for residential transition loans (aka hard money, bridge loans). Kevin specializes in fund formation and has assisted tons of private lending companies with securities and capital raising legal matters.
Navigating Fund Formation, Secondary Markets, and Global Capital with Kevin Kim
In this episode of Private Lending Insights, host Rocky Butani sits down with Kevin Kim, a seasoned attorney at Fortra Law, to explore the evolving landscape of private mortgage fund formation, secondary markets, capital raising strategies, and international investment structures. This conversation is packed with insights tailored for private lenders, fund managers, and real estate finance professionals looking to stay competitive in a rapidly changing market.
Key Discussion Topics:
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Market Trends in 2024 and Outlook for 2025:
- Fund formation was slow in early 2024 but gained momentum by year-end due to post-election optimism.
- Investors are showing renewed interest, particularly high-net-worth individuals and family offices.
- A noticeable increase in demand for non-conforming and opportunistic lending strategies.
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Challenges with the Secondary Market:
- Many lenders are finding their loans don’t fit secondary market criteria, prompting a shift toward balance sheet strategies and fund structures.
- Wall Street’s volatility has pushed originators to seek more control and flexibility through debt funds.
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Rise of International Capital:
- Growing interest from investors in Latin America, Western Europe, the Middle East, and previously Israel.
- Kevin explains the legal and structural considerations when accepting foreign capital, including tax, AML/KYC compliance, and offshore feeder fund formation (e.g., in Grand Cayman or BVI).
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Balance Sheet Strategies & Debt Fund Benefits:
- Lenders are forming debt funds not only for diversification and leverage but also to handle deals outside of traditional credit boxes.
- Funds offer enhanced control, flexible structuring, and investor alignment compared to relying solely on secondary market execution or bank lines.
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Evolution of Lender Strategies:
- More regional and even bi-coastal fund managers are emerging, moving beyond single-state operations.
- A trend toward combining multiple capital sources (funds, lines of credit, JV partnerships) to better serve borrowers and scale operations.
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Credit Lines and Banking Relationships:
- Post-banking crisis, credit line underwriting remains tight but is slowly improving.
- Smaller and regional banks are entering the space, offering more leverage options.
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DSCR and Long-Term Paper:
- Growing interest in holding and selling DSCR loans instead of just brokering them.
- Lenders are exploring balance sheet and fund solutions to capitalize on better economics.
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Predictions for 2025:
- Increased institutional participation via securitizations.
- More market entries from conventional finance professionals.
- Potential for notable acquisitions and failures as competition intensifies and capital flows expand.
- A possible “race to the bottom” in underwriting standards if securitization volume surges too quickly.
Visit Fortra Law’s profile to learn more and find their contact info, and connect with Kevin Kim on LinkedIn.
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