Cross-Collateralization

Cross-collateralization is a lending structure where multiple properties secure a single loan or multiple loans are secured by multiple properties, creating interconnected security positions that provide lender protection but limit individual asset flexibility.

Structure TypesConfiguration
Multiple properties, one loanPortfolio financing
One property, multiple loansLayered debt
Reciprocal securityEach property backs all loans
Blanket lienSingle charge over entire portfolio
Lender BenefitsAdvantage
Enhanced securityDiversified collateral base
Lower LTV riskTotal value exceeds total debt
Default remediesMultiple liquidation options
Reduced documentationSingle loan structure
Borrower ConstraintsLimitation
Sale difficultyAll properties encumbered
Refinancing complexityFull portfolio involvement
Release requirementsPay down threshold to free property
Value interdependenceOne property decline affects all

Related Terms

CollateralLien ReleaseLoan-to-Value (LTV)Portfolio Loan

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