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Arizona industry appointments update - 3/2/2007

Mar 01, 2007

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].
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