What is a Mezzanine Loan?
A mezzanine loan is not a real estate loan. Instead, a mezzanine loan is loan that is secured by the membership interests (think shares) of a LLC. (think corporation) that owns a huge real estate project. If you own all of the company, and the company owns all of the property, then you own all of the property.
Why would a lender make a mezzanine loan rather than just a normal mortgage loan? The answer is speed. It can take up to 18 months to foreclose a mortgage in New York. A lender can foreclose on the membership interests of a limited liability company in just 30 days because membership interests in an LLC. are just chattel (personal property), not real estate. There are many private lenders waiting to provide funding a mezzanine loans for stable, asset backed investments.
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