Prior to the Dodd-Frank regulatory changes in the retail/wholesale conventional residential lending industry, many mortgage loan officers and mortgage brokers had an arsenal of “go to” money sources for nearly every type of borrower client they might encounter in their business. There were conventional A paper lenders, Alt-A lenders, sub-prime lenders (B/C/D paper) and even institutional lenders that had a host of “creative programs” to fit almost every borrower circumstance: Lite doc, no doc, NINA, NINJA, bank statements only, stated income etc.
Although the industry has begun to see a semblance of a return to the market for other than strictly conventional loan programs … there are still really very few loan programs for owner-occupied borrowers today, compared to what there once was … and the pain points and qualifying criteria for what loan programs there are today, is demonstrably higher.
Looking at the investor borrower loan programs available today vs. what was available prior to Dodd-Frank regulatory changes is even more alarming. Particularly when you consider that all of the Dodd-Frank changes were intended (so we were all told) to bring a heightened level of “Consumer Protection” to the mortgage lending industry and “Investors” are by definition, and intent, NOT seeking consumer loan products. Yet the vast majority of anything available for a real estate investor in the conventional lending products arena, are all but gone. In the best cases, when they do exist, they exist with almost unattainable qualifying metrics for the vast majority of investors, to the extent that 30 +/- percent of all investor borrower applications for them are approved. Those that are approved, likely will take 50-90 days (or longer) to actually close and fund.
So, where does a conventional loan officer or mortgage broker go to find the financing that their investor clients come to them looking for? How do these industry professionals serve the needs of their clients and maintain relationships of superior service? Lastly, can this still be accomplished in a manner in which the loan originator can meet the needs of their client well and be compensated for doing so? Quite simply, the answer is yes, and it’s truly a lot simpler for all parties involved than one would expect.
Serious real estate investors have been using private money lenders for the acquisition and rehabilitation and/or renovation of investment real estate projects for decades. The reality is that private money/hard money sources have been around literally for centuries and in the current environment, they can be one of the easiest, most reliable source for real estate investors to access the capital needed to acquire residential real estate properties for either fix/flip operations or buy/fix/rent operations.
Conventional loan officers and mortgage brokers who have a solid working relationship with a top notch private money source can deliver resources to their investment real estate clients that no one else can. In doing so, the loan officer/mortgage broker can enjoy equitable compensation for their part in the transaction on behalf of their client.
Yes, they can also do so and remain compliant with all of the regulations relative to co-brokering, third-party originating and/or receiving referral fees.
The critical component for the conventional loan officer or mortgage broker is to source a reliable and credible private money source. A lender that has the capacity to meet the needs of their investment real estate borrowers, with programs, rates and loan terms that are competitive for their chosen market. A lender that is following the rules and regulations for the private money lending space (yes, they do exist). A lender that is going to protect the client relationship on behalf of the loan officer/mortgage broker, while at the same time, serving as a true “partner” to meet the needs of the loan officer, mortgage broker and the borrowing client.
Sadly, as with any industry, there are lots individuals and companies that present as viable opportunities for a private money source for investment real estate investors that frankly just are not. The good news is, there are also quite a few very capable, reputable and reliable private money sources that can be accessed to be a fantastic resource for a conventional loan officer/mortgage broker to add to their arsenal for delivering necessary services and lending resources to their clients. The key is knowing which is which. Here are a few ways one might go about that:
►Check the industry trade journals for resources to contact
►Interview (by phone or in person) contacts at companies that appear to have what you need. Ask for rate sheets, guidelines, application packages, etc. Review their Web sites and get a feel for the quality (or lack thereof) of the company behind the checkbook.
►Ask where their funds come from.
►If possible, visit their offices and find out if they will come to yours.
►Ask for a broker agreement or referral partner agreement for your review.
At the end of the day, it’s about who makes you feel the most confident and comfortable. This is a people business, and there are great people in it … there are not-so-great people in it. Spend some time to find the right fit for you and your clients.
It’s not always about rates and fees and promises … the more important aspects are truth, transparency, reliability, capacity and an unwavering commitment to superior client service.
Charlie Fitzgerald, MBA is branch manager and senior account executive for Civic Financial Services LLC. Charlie served proudly in the USAF as a law enforcement officer and was assigned to the inspector general of the Air Force Special Operations Division as an administrative management specialist. He may be reached by phone at (702) 561-1056 or e-mail [email protected].
This article originally appeared in the September 2016 print edition of National Mortgage Professional Magazine.
