What makes a lender determine/require an interest rate cap to be purchased?
Does it come down to individual policies of each lender? Is it a deal by deal decision? I have heard that some groups do not specifically require it, more of a borrower hedge vs a lender requirement. Just trying to understand the rationale for a lender saying they don't require a cap to be purchased.
Hedge to typically DSCR covenant. Notional can depend on preference of % OPB and tenor. Helps both parties focus on credit in case of IR risk/distress. These days its quite pricy unfortunately
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