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The commercial corner: Make an easy transition to commercial loans

National Mortgage Professional
Aug 23, 2005

The commercial corner: Make an easy transition to commercial loansMike BoggianoCommercial Lending, non-residential loans The Mortgage Press is pleased to present "The Commercial Corner," a monthly column by Mike Boggiano of Silver Hill Financial LLC dedicated to answering your questions about the commercial mortgage marketplace. If you have a question that you would like answered in a future installment of "The Commercial Corner," please e-mail [email protected]. Q:   Ive never offered commercial loans, in part because it seems that the switch from residential to commercial would be difficult. Do you have any advice? A: While it might seem intimidating to work on commercial deals if your business has been focused on residential loans, you might be surprised how easy the transition can be. With the right lending program and reasonable expectations, commercial deals are a lucrative way to diversify your revenue stream. Prepare yourself for a learning curve, knowing that each transaction will become easier. Think back to your first residential loan--your second was probably a little easier, as was your third and so on. In the same way, your comfort level with commercial deals will also improve each time you close one. Another suggestion is to start with small-balance deals (up to $1 million). Look for a streamlined lending program that takes some of the work out of your hands and accelerates the timeline. For example, it would be to your benefit to partner with a lender that manages the appraiser, title company, environmental evaluations and insurance, so you can focus on client communication, document collection and relationship building. Quick pre-approvals and closings are also a plus. From a value-added perspective, some lenders offer training programs and online support to ease the transition into a commercial program. Q:   What kind of profits can I expect from small-balance commercial loans? A: Profitability is dependent upon several factors, including up-front points, yield spread and fees--all of which vary by lender. The compensation structure is meaningless, though, unless you can close the deals; in this respect, it is worth your time to educate yourself about the program so your borrower has confidence in your ability to originate the loan. A consistent and predictable process will be a great asset to your business. Ask about additional rewards that might be available to you just for closing deals and/or in return for your loyalty to a particular lender. Q:   Once my plan is in place, how can I maximize my efficiency on commercial deals? A: Recognizing the need for a plan, production goals and commitment to the program is crucial to your success. With that first step in place, along with the tips already discussed, consider getting to know the processors and underwriters with whom you will be dealing during the loan cycle. You might even plan a visit to the operations center to see first-hand how it works. The more you interact with the lending team that's backing you up, the better your rapport, and hopefully, the smoother your deals for you and your clients. After closing your first few commercial deals and enjoying the increased revenue (not to mention many more benefits for your business), you'll probably wonder why it seemed so difficult and why you waited so long. Mike Boggiano is senior vice president, national sales manager for Silver Hill Financial LLC. He may be reached at (877) 676-1562 or e-mail [email protected].
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