Increase profitability by adding commercial to your game planMike Boggianosmall commercial loans, diversity, differentiate, networks
Don't overlook small commercial loans
Q: What can I do to remain profitable as the market
tightens?
A: Competition is intense in the current residential mortgage
market. Phones have not been ringing faster than you can answer
them and borrowers haven't been trampling down the doors for some
time now. As the residential market contracts, brokers must find
new revenue streams, preferably from products their competition
isnt offering.
Here's what you can do now: diversify and differentiate. Small
balance commercial mortgages are a natural progression for brokers
who have offered an array of residential mortgage products. Not
only can you find products in the marketplace that make small
balance commercial transactions easier than ever before; you can
serve more borrowers by offering these loans. The market
opportunity is vast in small balance commercial, and brokers are
wise to position themselves as experts to current clients and
referrals who have a need for this product. Economists predict that
the strong commercial real estate environment is poised to continue
well into 2007.
Begin with a game plan
Your game plan should include getting educated about the market and
product options, developing a stable of small commercial lenders to
serve borrower needs and setting goals for integrating commercial
into your product line up.
Start small - literally
Multi family properties are a perfect transition into commercial
lending because the real estate is similar to residential. Small
balance programs are more likely to feature streamlined processes.
For example, look for a lending program that takes some of the work
off of your hands and accelerates the timeline. Some lenders even
manage the appraiser, title company, environmental evaluations and
insurance - freeing you to focus on client communication, document
collection and relationship building. Quick pre approvals and
closings are a plus that will benefit you and your borrowers. Also
look for lenders that offer training programs that will help ease
your transition into the commercial arena.
Build upon existing referral networks and forge new
ones
Use industry relationships with real estate agents and contractors
to find potential mortgage clients. Banks and credit unions are
another source for business; they frequently encounter commercial
loan opportunities they are unable or unwilling to serve, but wish
to keep their depositor base happy. Become the mortgage
professional who gets those referrals by networking with loan
officers at local institutions.
Enhance your advisor role
Learn and understand the financial goals and specific needs of your
clients. This helps you place them in the right loan, which
increases their comfort level and confidence in you. Borrowers who
have not experienced the commercial loan process may find it
intimidating and will appreciate your guidance.
Find a niche and serve it well
For example, property cash flow can be a common roadblock for small
commercial borrowers, especially in markets where cap rates are
low. Offer a product with a debt to income underwriting approach
and you can help more borrowers and investors finance properties
that otherwise would not pass traditional commercial underwriting
guidelines.
With reasonable expectations and the right lending program(s),
brokers can capitalize on small commercial deals as a lucrative way
to diversify their revenue streams. According to many brokers who
have successfully diversified, small commercial is not as
intimidating as it may seem. Your comfort level with commercial
deals will increase each time you close one, not unlike it did
after your first residential loan. Prepare for a learning curve,
knowing that each transaction will become easier. Get to know your
account manager, processors and underwriters that you will be
dealing with during the loan cycle. The more you interact with the
lending team, the more you learn, the better your rapport and,
hopefully, the smoother your deals will close.
Small balance commercial loans are a smart product for
residential mortgage brokers who need to diversify their income and
stand out above the competition. Get in the game today!
Mike Boggiano is senior vice president, national sales
manager for Silver
Hill Financial LLC. He can be reached at (877) 676 1562 or
e-mail
[email protected].
