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: Â 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: Â 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
Q: Â 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]