Silver Hill Financial: Commercial lending that feels like homePeggy KernSilver Hill Financial,Commercial Lending
In the corporate vernacular, terms like "innovation," "paradigm
shift" and "revolutionary" are overused nearly to the point of
futility. Hearing a company proclaim its "first-class customer
service" is like hearing a politician promise "a better tomorrow,"
or a salesman pledge their "prices that can't be beat." Still, once
in a blue moon, a company comes along and makes us wish these words
weren't so hackneyed: a pacesetter that changes what we expect, and
makes life easier by thinking about old ideas in new ways.
The Mortgage Press recently had an opportunity to sit
down with such a company (interestingly, in July 2004 when there
was, in fact, a blue moon). Headquartered in Miami, Silver Hill
Financial LLC originates small-balance commercial loans of up to $1
million, sourced through a network of brokers and correspondents.
While there are certainly other players in this market, Silver
Hill's most notable accomplishment--the one that invokes words like
"innovation"--is how they've harnessed the unruly small-balance
commercial lending process into something quick, consistent and
remarkably broker-friendly.
Fear of Flying
With the refi boom reduced to a whisper and the Fed steadily
raising rates (up another quarter-point as of Aug. 10), residential
mortgage brokers are ostensibly left with two options: diversify
their product line, or face extinction. Opportunities still exist
in the residential marketplace (reverse mortgages and home equity
loans are the most obvious examples), but at substantially
diminished levels. And then there's commercial lending, a category
that for many residential brokers, conjures up a slew of
trepidations: the loans are too complicated, too different from a
home loan; they are unpredictable; and what's worse, they don't pay
very well. For residential brokers, the commercial arena is often a
scary place to venture.
Enter Silver Hill Financial and their dramatically simplified
commercial lending process that integrates residential elements and
standardized criteria. Combine an extensive training and support
program, and the result is a commercial process that, for
residential brokers, feels a lot like home.
Remembering the Borrower
When Silver Hill set out to create their commercial program,
they started from scratch and set aside the traditional industry
parameters that emphasized the property over the borrower.
"The preconceived notion about commercial lending has been that
you cannot standardize the underwriting process because the
properties are unique, the borrowers are unique and you need
extensive expertise in order to properly assess the risk and be
comfortable granting the loan," explained Joanna Schwartz, senior
vice president for Silver Hill. "However, given our focus on loans
under $1 million, we believe the credit decision is virtually
identical to those made on a residential loan. If the strength of
the borrower--their credit score, income and overall leverage--is
truly the key indicators of their ability and willingness to pay us
back, then we should measure those above and beyond everything
else." Which is not to say that Silver Hill overlooks the
property's worthiness. The commercial appraisal requires more
property details than residential. However, Silver Hill's
underwriting model offers much more flexibility, which means
approvals for borrowers who would otherwise be turned away.
"If it serves the borrower, we underwrite [the loan] in a
residential style; that is our primary focus and approximately 80
percent of our transactions are underwritten in that fashion," said
Schwartz. "However, if a borrower does not pass under those
criteria, we will look at the more traditional commercial
underwriting aspects of the deal. So, the borrowers win either
way."
Take, for example, an applicant who has a strong income and good
credit, but has never invested in real estate before. What's more,
the property they want to purchase is partially vacant due to poor
management. Most commercial programs would reject this applicant
because the property is not self-sustaining and the person does not
have experience in the commercial industry. For Silver Hill,
however, this is a target borrower; someone who is not overly
leveraged, who sees an opportunity and has other sources of income
that can carry the property while it's being repositioned in the
market. As another example, consider a highly leveraged borrower
who has a portfolio of 20 properties.
"We won't turn that borrower away because those are the
borrowers who are very good at finding opportunities in the
market," explained Schwartz. "In those cases, where the borrower
would probably not pass our debt-to-income, residential-style
underwriting, we will look at it like a traditional commercial
deal. We'll consider the debt service coverage ratio and the cash
flow of the property to decide if we'll take that loan."
Like the residential side of origination, Silver Hill has its
own set of compensating factors to consider. And it's this sort of
consideration of each individual borrower and unique loan scenario
that makes Silver Hill distinctive among lenders.
It Takes a Village
Like most professionals venturing into a new field, residential
brokers don't want to feel isolated or completely on their own when
taking on the commercial arena. To ease the burden, Silver Hill
offers an extensive training and support program for its brokers,
making the transition from residential to the commercial arena much
easier.
"You don't have to be an expert on commercial properties,"
explained Silver Hill marketing director Salomon Wancier. "If you
can submit a 1003 and a loan supplement, we'll take it from there
and walk you through the process. You can have as much or as little
involvement in the transaction as you choose."
Every broker is assigned an individual account manager to
provide personalized customer service and support. The account
manager, in turn, is backed by a staff that is dedicated to
facilitating the loan process, and makes sure that the borrower and
broker are properly serviced. This includes filling in the gaps of
the broker's commercial lending knowledge. The company also
provides marketing materials so brokers can generate leads and
facilitate their transition into the commercial business.
"Once a loan is pre-approved, the borrower and broker receive a
letter that introduces the team of people who are going to be
working on that deal throughout the process," said Schwartz. "It
introduces the account manager, the account assistant, the closer
and the processor--the four people who, from an external
perspective, a borrower and broker will deal with. This is a real
comfort for brokers; the fear they have disappears right away
because any question they have can be answered immediately."
"We will be your co-broker, so to speak, in that we'll educate
you about the process, facilitate getting your deal closed and you
still can earn your full commission," explained Silver Hill vice
president, national sales manager Michael Boggiano, CPA.
Brokers can also take advantage of the company's Silver
Sessions, a nationwide series of two-hour training sessions on
Silver Hill's programs and how residential brokers can join the
commercial marketplace.
The training series will soon be offered online as well.
"The e-learning modules are an introduction to our process and
our definitions of the commercial lending process for small-balance
loans," noted Wancier, who designed the online program.
Once a broker or company has established a relationship with
Silver Hill, the hands-on support only increases through the
Alliance Program.
"Our Alliance Program is designed for companies or selected
brokers who have met certain volume requirements," explained
Schwartz. "We will travel for clients who have multiple loan
officers and personally give them training."
Alliance Partners also have access to a broader array of
marketing assistance including custom marketing materials and
pricing benefits for closing a higher volume of loans.
The Silver Lining
Silver Hill's average closing time is 45 days, and pre-approvals
are delivered within 48-72 hours. Brokers can earn two points on
the front end of the loan, and two points on the back through a
yield spread premium and reasonable additional fees. On a $500,000
commercial loan, brokers can walk away with between $20,000-$22,000
in fees and commission.
Silver Hill has also designed their operation as a parallel
process; once the appraisal is ordered, the company's staff
immediately go to work: the closer begins working on title, the
processor is collecting the required documents to review the
underwriting, and the goal is to have the underwriting completed
before the appraisal is received. This is all designed to create a
rapid and predictable closing time that mirrors the residential
process.
Dealing with third parties is another concern facing brokers:
there's the appraiser, the title company, and environmental
evaluations and insurance. Silver Hill manages these processes,
keeping it simple and predictable for the broker.
So, what does it take to be successful as a Silver Hill
commercial broker? Primarily, it takes interest and commitment.
"If it sounds like something that [the broker is] very
interested in and they want to pursue it aggressively, they will be
successful, regardless of whether they start out as a two-man shop
or a 20-man shop," said Schwartz. "It's really a matter of their
commitment to building this line of business and making sure they
partner with a lender they can trust."
"A broker can basically be set up with a phone, a desk and a
computer and doesn't need to be in New York City; he can be in Des
Moines, generating traffic to his Web site," explained Boggiano.
"As long as you're dedicated to marketing the program and drumming
up business, you're going to be very successful."
Through creative thinking and bold ideas, Silver Hill Financial
has changed the commercial lending process for small-balance loans.
For residential brokers facing a shrinking pool of options, this
may be the life raft they've been looking for.
Silver Hill Testimonials
What are brokers saying about Silver Hill Financial LLC?
"In my 35 years of experience in the mortgage industry, I
have never seen such a level of cooperation. Silver Hill Financial
was incredibly cooperative and explained the process every step of
the way."
--Lanny Asner of Bankers Mortgage, Clearwater, Fla.
"A purchase mortgage for a 15-unit office building financed
with Silver Hill Financial: This was my introduction to commercial
financing. My deal went even smoother than your typical residential
mortgage."
--Richard Fancher of Northeast Mortgage, Southbury, Conn.
"Silver Hill Financial delivered on all of their promises
and the loan was approved. As a result, my customer was satisfied.
I have confidence in using a lender that can get the job done. Best
of all, I earned three points for myself."
--Anish Dave, president of Vista View Mortgage Corporation, Miami,
Fla.
