Bridge and DSCR Activity Surges

Driven by strong secondary market conditions, bridge and DSCR loan originations grew rapidly in 2024, setting the stage for continued momentum in 2025.

This article provides private lenders with data-driven insights, including competitive benchmarking analysis to understand meaningful trends in private lending activity to make sure your business retains its competitive edge in an evolving marketplace.

EXPANSIVE GROWTH IN BRIDGE AND DSCR

In 2024 we witnessed a dynamic shift in business-purpose lending.

According to data aggregator Forecasa, the top 100 private lenders in the United States increased their loan volumes by 25.3% in 2024 (increasing by approximately 27,000 total loan transactions year-over-year for a total of more than 133,000 loan  transactions).

Twenty-two percent of the top private lenders' volumes decreased year-over­ year, while the remaining 78% increased.

Lightning Docs users experienced a dramatic growth of 31% year-over-year increase in bridge loan volumes, driven by favorable secondary market conditions.

DSCR loan volume, on the other hand, increased an incredible 52% year over year across all Lightning Docs users, with dramatic growth in the third and fourth quarters, reflecting the resilience of the product even in uncertain economic conditions.

As we moved into January 2025, a typically slow month for our industry, these trends surprisingly continued. Bridge loan volumes increased 51% year over year when comparing January 2024 to January 2025-and an astounding 123% for DSCR loans during the same time period.

BRIDGE LOAN ANALYSIS

LOAN VOLUMES. When tracking the same 125 users who started using the system to make bridge loans on or prior to January 1, 2023 through December 31, 2024, there was an uptick of 31% year­ over-year growth. The first quarter saw the softest growth, with a 25% year-over­ year increase; the remaining quarters saw consistent growth from 31-33% (see Fig.1).

INTEREST RATES AND LOAN AMOUNTS.

Bridge loan interest rates decreased for the eighth time in the last nine months, dropping73 basis points since January of last year. The revival of the 2024 loan securitization market, including the first rated loan securitizations, is widely credited for the reduction in interest rates. Average loan amounts increased from $583,060 in January 2024 to $667,527 in December, but saw them drop back down to $634,321in early 2025.

When segmenting interest rates, it becomes clear that market participants must understand their local market to make pricing determinations. For example, in January 2025, the national average interest rate for bridge loans was 10.83%. However, most interest rates varied between 9-12.99%, with only 35.7%

of loans between 10-10.99% (see Fig. 2).

LOCATION, LOCATION, LOCATION. 

For private lenders interested in benchmarking against their peers, the location of property is still the dominant driver determining average loan amounts and average interest rates. When reviewing the top ten bridge loan markets in the fourth quarter of 2024, you will find a full 100-basis point spread in December, based upon where the lender is making loans (see Fig. 3). Interestingly, states such as Texas consistently provide lower interest rates than markets such as California, even though the loan transaction sizes in California are generally much larger.

BEST INTEREST RATE ENVIRONMENTS. 

Where are the best opportunities? For those seeking the greatest rates of return, there were a total of 25 different high-volume counties that provided a better-than­ average national interest rate of 10.92% in fourth quarter 2024 (see Fig. 4).

LARGEST LOAN BALANCES. Because many loan originators sell their loans and their primary source of revenue is the fee income derived from loan transactions, many lenders seek states with the largest loan balances and, thus, origination fees. It's likely no surprise these amounts are concentrated on the West coast and in the Northeast, with states such as California and Washington just shy of $1,000,000 average transaction size and states such as New York, Massachusetts, Nevada, and Utah all coming in abo e $1,000 000 on average (see Fig. 5).

Private lenders maintained consistent focus on their top market year over year, with the top eight states remaining unchanged from 2023 to 2024. Ohio and Pennsylvania rounded out the top ten, swapping positions between the two years.

When looking at the data from January 2025, California, Florida and Texas remain the top three with an uptick in volume in Indiana and New Jersey, while llinois, Georgia, and Ohio dropped (see Fig. 6).

Although there was notable movement among active MSAs in 2024, the top six markets remained large unchanged, with Los Angeles County maintaining a commanding lead. Early data from 2025 indicates that the top three markets have held steady so far (see Fig.7).

DSCR LOAN ANALYSIS

LOAN VOLUMES. When tracking the same 33 users who started using Lightning Docs to make DSCR loans on or prior to January I, 2023 through December 31, 2024, there was a huge increase of 52% in year-over-year growth, with an astounding 92% year-over-year growth in fourth quarter 2024 (see Fig. 8).

INTEREST RATES AND LOAN AMOUNTS. 

DSCR interest rates increased for the third straight month in January 2025 after a steady decrease throughout the first 10 months of 2024. Like bridge loans, favorable secondary market conditions in 2024 provided an advantageous market for real estate investors as rates fell far more than typical benchmarking indexes would normally suggest.

Similar to bridge loans, DSCR loan amounts increased throughout the year from an average national loan balance of$270,300 in January to $312,465 in December; however, average volumes declined to $281,048 in January 2025 (see Fig. 9).

Unlike bridge loans, the DSCR loan market shows less diversification in interest rates. In January 2025, nearly 64% of loans were written between 7-7.99%, with a quarter of the market above 8%, while the sub-seven percent market has continued to shrink (see Fig.10).

LOCATION, LOCATION, LOCATION (STILL).

Location still matters in the context of DSCR lenders in both loan amounts and average interest rates. Interestingly, certain markets such as Duval County, Florida, where Jacksonville is located, provide generally below-market interest rates and lower loan balances, whereas markets such as Essex County, New Jersey, where Newark is located, tend to provide above-average market interest rates and almost n-vice the national average for loan balances (see Fig. II)

For DSCR lenders, 2024 brought significant changes in where lending activity occurred compared to 2023-quite different from their bridge lender counterparts. The most notable change was California, which became the seventh largest DSCR market in 2024. In early 2025, Ohio and Texas started strong. Missouri also entered the top 10 and North Carolina dropped out (see Fig. 12).

By Nema Daghbandan. Esq.

Private Lender, The Official Magazine of AAPL

Spring 2025, p. 24-33