Fix and Flip Loans 2026: Denial Rates, Delinquency and the Law

What the law says a fix and flip loan is

The top results for “fix and flip loan” are lender pages that describe the product in the lender's terms. The federal rulebook describes it by what it is not. Regulation Z, the rule that implements the Truth in Lending Act, begins its list of exempt transactions with these words: “The following transactions are not subject to this part”. The first two are “An extension of credit primarily for a business, commercial or agricultural purpose” (12 CFR 1026.3(a)(1)) and “An extension of credit to other than a natural person, including credit to government agencies or instrumentalities” (12 CFR 1026.3(a)(2)). A flip loan to a company, which describes 86.0% of the 2025 loans below, is exempt on the second ground whatever the loan is for (our reading). The practical meaning is that the disclosures and mortgage rules of Regulation Z, such as the appraisal rules for higher-priced mortgages in 12 CFR 1026.35, are not what governs these loans (our reading). The contract is.

That does not make the loans invisible. Regulation C excludes a mortgage loan “made primarily for a business or commercial purpose” from HMDA reporting “unless the closed-end mortgage loan or open-end line of credit is a home improvement loan”, a home purchase loan or a refinancing (12 CFR 1003.3(c)(10)). A flip loan finances a home purchase, so a lender over the reporting threshold reports it. That is why a federal data set exists for a product the consumer-lending rules do not reach. Which loans are “primarily” for a business purpose is decided under the regulation's own tests, which we do not cover here.

How often a fix and flip application is denied

We used the nationwide 2025 file of originated and denied applications that we streamed from the FFIEC Data Browser and kept first-lien, closed-end, conventional home purchase applications on one-to-four-unit investment properties made for a business purpose with a term of 24 months or less. Of 57,059 decisions, 48,550 were originations and 8,509 denials: 14.9% denied (our arithmetic). The file holds only these two outcomes, so applications that were withdrawn or left incomplete are not in the denominator. Comparison groups from the same file and filters: conventional personal-purpose investor purchases, 77,025 decisions, 14.6% denied; business-purpose investor purchases with a term above 24 months, 202,640 decisions, 13.4% denied. A flip application is not harder to get through than other investor purchases on this measure (our reading).

Principal reasons given for denial, short-term investor purchase applications, 2025

A lender may report up to four reasons, so the shares overlap. The FFIEC field list defines the reason as “The principal reason, or reasons, for denial”. Two readings (ours): collateral, meaning the property or its value, is the most common stated reason on a loan that is secured by a house that needs work; and debt-to-income ratio, an income test, still appears in 6.5% of denials.

Denied share of decided applications by loan amount, borrower type, term and units

The borrower-type row deserves care. A company applicant is “not a natural person” in the HMDA coding; in Regulation C the lender reports age as not applicable in that case (12 CFR 1003.4(a)(10)(ii) and its commentary). We use that coding to identify company borrowers (our reading). Company borrowers made 87.3% of the decisions and were denied more than twice as often as individuals. We cannot say why; one possibility is that individuals who apply under the lender's flip program are pre-screened, a guess the data cannot test.

The largest short-term lenders: decisions and denied share, 2025

Do not read this table as a ranking of who approves. The spread, from none denied to 62%, is wider than credit risk plausibly explains (our reading). Regulation C defines an application as “an oral or written request for a covered loan that is made in accordance with procedures used by a financial institution for the type of credit requested” (12 CFR 1003.2(b)(1)), so a lender that logs each online request as an application will report many more denials than one that counts only files that reached underwriting. The proof that the counting differs is inside the data: RCN Capital and Anchor Loans each appear under a second registration, and the second Anchor Loans registration reports 216 decisions, all of them denials, while the second RCN Capital registration reports 667 decisions and none denied. For named-lender terms and rates, see our best fix and flip lender page.

By state (decided applications, denied share), the largest markets ranged from Missouri (10.5%) and California (12.1%) to Georgia (18.9%), Florida (18.7%), Illinois (19.3%) and New York (24.7%). With a few lenders setting practice in each state, we do not read these as state differences.

What the signed loan looks like

For the 48,550 loans that were made, the federal file shows the structure and almost nothing about price beyond the note rate (our arithmetic). The median loan was $265,000 and the median note rate 10.2% (middle half 9.25% to 10.99%). 79.5% had a 12-month term, 4.0% six months, 3.6% fifteen, 3.5% eighteen and 3.3% twenty-four. 95.3% were interest-only and 94.3% carried a balloon payment, so the borrower owes the whole balance at the end. The fields that would show the extra cost are empty: not one of the 48,550 loans reports a numeric prepayment-penalty term, discount points, origination charges or total loan costs. HMDA asks for points and borrower-paid costs only for loans subject to the Regulation Z disclosure requirements (12 CFR 1003.4(a)(18) and (a)(19)), which this product is not (our reading). So points, origination fees, draw fees, extension fees and exit fees are known only from the term sheet.

The SEC filings of a lender that owns these loans add one term worth reading for. MFA Financial's June 30, 2026 Form 10-Q says: “Certain Transitional Loans contain contractual features which increase the loan’s interest rate following an event of default.” It also notes that its transitional loans “contain various contractual extension features, typically ranging from three to twenty-four months subject to certain conditions, generally including our consent.” The 10.2% HMDA median can be cross-checked against it: MFA reported a weighted average coupon of 10.09% on its single-family transitional loans at June 30, 2026 (and 10.31% at December 31, 2025). For the cost side of a deal, our fix and flip calculator and hard money loan rates pages use the same federal data.

After closing: how many flip loans fall behind

Public lenders are the only source of delinquency on these loans. MFA Financial, which owns Lima One Capital, discloses its “Single-family transitional loans” by days past due; the 10-Q describes them as “short-term business purpose loans primarily originated by Lima One” to borrowers who “generally intend to rehabilitate or construct residential housing and then refinance or sell the properties”, and says they are “also sometimes referred to as ‘Rehabilitation loans’ or ‘Fix and Flip loans’”.

MFA Financial's business-purpose loans by days past due (percent of unpaid principal)

Of the single-family transitional balance, $78.6 million (11.7%, our arithmetic) was 90 or more days past due at June 30, 2026. The weighted average term to maturity was 6 months and the loan-to-value 68%. MFA also says that “Transitional loans are generally only extended if the loan is current and in compliance with various other loan terms” and that “At June 30, 2026, approximately 85% of our Multifamily transitional loans and 24% of our Single-family transitional loans held as of period end had been extended.” The company's explanation: “Given the short duration of our Transitional loans, maturity extensions are a regular occurrence, irrespective of market conditions.”

Redwood Trust (CoreVest), which securitizes residential bridge loans, reports a broader group. At June 30, 2026 its residential investor bridge loans had $1,333.8 million of unpaid principal, of which $146.4 million was 90 or more days delinquent: 11.0% (our arithmetic), against 9.6% at December 31, 2025 ($1,438.7 million and $137.9 million, our arithmetic). The group includes build-for-rent and multifamily bridge loans; the single-family “Residential Transition Loans” (“short-term loans secured primarily by 1–4 unit properties used to acquire, renovate, or reposition properties”) were $491.3 million of it (our sum). Redwood says that “a certain level of maturity extensions are a routine asset management outcome for these loans, irrespective of market conditions”, and that in the second quarter of 2026 it modified or put into forbearance loans with $208 million of unpaid principal, against $363 million a year earlier.

Rithm Capital's Form 10-Q for the same quarter says its residential transitional lender Genesis “had commitments to fund up to $ 2.2 billion of additional advances on existing mortgage loans as of June 30, 2026”. Those commitments are “generally subject to loan agreements with covenants regarding the financial performance of the customer and other terms regarding advances that must be met before Genesis funds the commitments”: draws against the repair budget are conditional.

What this does and does not show: it is one holder's balance sheet at one date, valued by that holder; it is not an industry default rate, and the lenders differ in who they lend to and when they extend or modify. A loan that was extended appears current. It does show that a 12-month balloon loan is in practice often a longer one, and that a meaningful share of the books of the public lenders that publish these tables is behind.

What a borrower can do with this

1. Ask what the lender counts as an application, then expect the process, not the rate, to decide the outcome. Collateral (27.7% of denials) and credit history (17.0%) are the two most-cited specific reasons; a clean scope of work, an as-is and after-repair value from an appraiser the lender accepts, and a credit report you have already read lower the odds on the two largest reasons (our reading).
2. Get the whole price in writing. The federal file has no points, origination, draw, extension or exit fees for these loans, and Regulation Z's disclosures do not apply (12 CFR 1026.3(a)). Ask for the term sheet's default rate, the extension fee and the interest-reserve rules.
3. Plan for the balloon. 94.3% of loans carry one and 79.5% run 12 months; MFA reports that 24% of its single-family transitional loans had been extended. Price an extension and a 6-month delay into the deal (our reading). The fix and flip calculator does this.
4. Compare lenders on the full term sheet, not the rate floor: see best fix and flip lender. For what flipping costs and how a flipper is taxed, see house flipping.
5. If you borrow through an LLC, expect the same rules. Credit to “other than a natural person” is outside Regulation Z (12 CFR 1026.3(a)(2)); the loan's remedies are what the note and guaranty say.

These links go to the lenders' own sites. This page does not say that any of the three would approve you: in the HMDA table above Kiavi and Lima One are among the largest short-term lenders, and their denied shares (8.6% and 26.4%) reflect how each counts applications.

FAQ

Loan-level data: FFIEC/CFPB HMDA Data Browser, nationwide 2025 file of originated and denied applications (actions 1 and 3), streamed on October 10, 2026 with our script stream_extract.py (investment-property and two-to-four-unit rows kept: 906,337) and analyzed on October 13, 2026 with hmda_flip.py (first-lien, closed-end, conventional home purchase applications on one-to-four-unit investment properties, business purpose, term of 24 months or less); the scripts, the extract log, the output and the tables are in sources/. Field definitions from the FFIEC public LAR data fields; lender names from the FFIEC 2025 filer list and, for one registration, the GLEIF record of its LEI. Rules: 12 CFR 1026.3, 12 CFR 1003.2, 1003.3 and 1003.4 and Regulation C commentary (Electronic Code of Federal Regulations, current as of October 1, 2026, read October 13, 2026). Delinquency and extension data: MFA Financial Form 10-Q for June 30, 2026 (accession 0001055160-26-000015, filed August 5, 2026), Redwood Trust Form 10-Q for June 30, 2026 (accession 0000930236-26-000027, filed August 5, 2026) and Rithm Capital Form 10-Q for June 30, 2026 (accession 0001556593-26-000029, filed August 4, 2026). All percentiles, shares, medians and dollar figures from HMDA are our arithmetic. This is analysis of public documents, not investment, legal or lending advice.