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Second mortgage prospecting: Where to go and what to do next

National Mortgage Professional
Jan 31, 2006

Jump on the bandwagonAnthony Gramzacommercial lending, networking and co-brokerage To jump on the bandwagon, according to Mr. Webster, is to support a cause that seems assured of success. The cause that I have been promoting for many years, both in articles published by The Mortgage Press and other trade magazines, is education of the commercial mortgage brokerage side of our industry. As an approved national instructor for the National Association of Mortgage Brokers, I travel all over the country to teach classes on the basics of commercial loan brokering. I also bring to the classes my 16 years of experience in the field and, as they say in this business, my years in the trenches. The majority of attendees are currently mortgage brokers and agents involved in the residential side of our industry. Some of the attendees take the classes only to obtain their necessary credits for continuing education and licensing. Others, however, do have an interest in commercial brokering, but they have some real reservations about jumping into the well. And a small portion will dedicate a greater degree of time and effort to make deals happen. Without continuing education, you become stale. Furthermore, you rely and hope for the best in only one segment of our industry. This raises many questions. What do I do when the residential side of this industry moves to the snail pace? What happens when the refi business is completed? What happens when the interest rates move up the scale, causing typical homebuyers to hold and wait? Am I prepared today to move into commercial? Am I to rely on other brokers to take the commercial business from me? Do I say no to the client that is seeking a commercial loan on that small or large project in the territory I operate in? An examination of your business practices may be long overdue. If you intend to make our industry your true career, then you need to open the window of opportunity, and that means further education to enhance those opportunities. I just returned from teaching both the basic and advanced NAMB commercial loan brokering classes for the Florida Association of Mortgage Brokers. In addition, we presented a four-hour seminar on international financing. Over the three days, attendance exceeded 386, and in attendance were both experienced brokers who had successfully completed commercial transactions and some who were not as experienced yet. But guess what? It didn't matter. Both groups learned something new. Those with some experience sharpened their skills, and the inexperienced brokers and agents found themselves saying, "It's not as difficult as I thought!" The enthusiasm was great, and much credit and accolades go to the Florida brokers themselves, as well as FAMB Executive Director Karen Wordell-Smith and her staff of professionals who made this educational conference a real success. Our wish is that our other state partners will follow suit. If you are currently doing some commercial loan brokering, then you know that the marketplace is very active, with more available commercial mortgage funds than deals. What is especially surprising is the interest rate scenario that we have had for the past three or four years. The rates, terms and conditions have been extremely favorable to the investors in the marketplace and many have taken advantage of these offers, but we still find many investors sitting on the sidelines. What they are waiting for? We have no idea. Our crystal ball seems to indicate a continuation of these rate and terms, and hopefully the words of wisdom from the soothsayers of the Far East will remain true. For example, a recently placed loan for $1.5 million on a funeral home in the south at 5.75 percent fixed for the first two years, with a conversion to a fixed five-year term over a 20-year amortization at the five-year Treasury rate plus 325 basis points. How about a conversion of a seven-story office/warehouse complex into a flag hotel with a construction loan at prime plus one percent, converted into a 10-year fixed at 6.5 percent and a 25-year amortization schedule? Or get this one - a major shopping place, with major AAA tenants at a rate of 0.78 basis points over the 10-year Treasury! At today's published rate, the loan would close at a walloping 5.08 percent! Are you taking advantage of this marketplace? If not, you should. Lastly, if you still do not feel that this side of our industry is for you, then, as I always stress to our fellow brokers, at least get the basics and get to know some of your fellow brokers who do commercial loan brokering in your state. Networking and co-brokerage play an important part of my business, and can be profitable for yours as well. Don't let that commercial client walk out of your office, for when you do, the commission dollars walk also. Take advantage of the educational opportunities offered by your association, and if your state chapter is not offering the NAMB-sponsored commercial classes, then you need to ask why not. You are the association, and you deserve it. Let me close with this short reminder from our industry preamble: "As a member of the National Association of Mortgage Brokers, we have demonstrated a firm commitment to remaining an informed professional in the rapidly changing world of real estate finance. This dedication, which includes adherence to a precise Code of Ethics and Standards of Professional Practice, results in our customer being represented by honest, educated and sincere representatives." Have a great day, and success in your next commercial brokering efforts. Anthony Gramza is president of Rochester, N.Y.-based AMG Commercial Mortgage Group. He may be reached at (585) 264-9540 or e-mail amgmtg@frontiernet.net.
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