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Dealing with mortgage fraud starts at the top

National Mortgage Professional
Mar 10, 2008

Is commercial lending right for you?Dan Sullivanrules and regulations, no yield spread premium limit, commercial appraisal, capitalization rate The devil's advocate It's been a rough winter no matter where you live. We are all hoping that spring will bring some relief to all the bad news that keeps piling up on the mortgage industry, but it doesn't seem likely. Home sales are down, refinances won't last forever and property values are still causing problems. Is it time to abandon residential mortgage and start looking for opportunities elsewhere? Maybe, but I say no! If you are like the rest of us, you have been barraged with e-mails saying it's time to look at commercial lending. The e-mails and advertisements tout that commercial lending doesn't have all the rules and regulations, or the rights that residential lending affords borrowers. In many areas of the country the commercial market is fairly strong, while the residential market in the same area is suffering. But let's take a closer look at commercial lending. First of all, you have been barraged with commercial lending e-mails, and so has every other residential loan officer in the country. Second, commercial lending doesn't have all the rules and regulations, and with no yield spread premium limit, there's a fortune to be made. Then again, every residential loan officer in the country is trying to get a commercial loan right now. Before you started thinking about trying commercial loans, remember that there wasn't a shortage of commercial loan officers before all the hoopla started, and there hasn't been a sudden surge in the number of commercial loans. Now there are simply more loan officers trying to get a piece of the same pie, making it more competitive. Doesn't that sound like the residential market you are in right now? And what about the learning curve? Have you ever seen a commercial appraisal? Do you know where to get one, what the investor will require on it, what a capitalization rate is and what it will cost? What endorsements are required on title? What is the cost of a commercial title report? If you don't fill out a 1003 and a good faith estimate, what forms are required? Before you abandon residential lending or take on commercial lending on the side, you should figure out how long the learning curve will be and where to learn the trade. Remember when you started in residential mortgage? The first year wasn't much fun as you were trying to learn the ins and outs of the industry. Don't forget that you'll have to learn the commercial lending process as well. Am I saying not to ever get involved in commercial lending? No. Many great commercial loan officers came from the mortgage industry. I am saying that you shouldn't jump in the pool if you don't know how to swim. Commercial lending may seem like the right move, but there are also things that can be done to get a loan in the residential market right now, even while it's in bad shape. I am convinced that if you put the same effort into building new Realtor relationships that you would have put into learning commercial lending and attracting a commercial loan, the payoff will be tenfold and more beneficial in the future. You already know the ins and outs of residential lending, you just need more business, and a new way to get it. Here's how: Drink twenty cups of coffee in the next twenty days. You might think I'm kidding, but you are twenty cups and twenty days away from more loans in your pipeline. This is a method I have used over and over again as a loan originator. When the market slowed down, I committed myself to drinking twenty cups of coffee in the next twenty work days. Schedule a coffee date with each Realtor that you know, whether you are currently doing business with them or not. While you are having coffee with each of them, ask who else they know that might be willing to have a cup of coffee with you. Pretty soon your calendar will be filled with appointments. Why would a Realtor drop everything to have coffee with you? They would do it because you are not trying to convince them to use you, but that you are hoping to learn from them. In fact, tell them up front that you don't want their business. Tell them you want to hear their perspective on how to become a better loan officer. Most Realtors will be happy to give you tips on how to be the perfect loan officer. People love the opportunity to help people and take credit for it. Keep in mind that the reality of the situation may be completely different. You may not receive much practical advice from your twenty Realtors. Once, a Realtor suggested to me that I should take every call from a Realtor that comes in and never allow a call from a Realtor to go to voicemail or even the receptionist. This was impractical advice. However, many of the ideas you will hear are good ones. Make sure you do a few very important things during the coffee date. First, take notes so that the Realtor knows what they're saying is important to you. Second, listen carefully because your real agenda is to establish a relationship with this person and understand what they have to say. Third, offer to drive. If you drive to a coffee shop that is five minutes from their office, you have just turned a twenty minute cup of coffee into a half-hour of relationship-building. While you're driving back to their office, talk about how you think it's important to keep everyone informed on the progress of a loan, or whatever you picked up on that you think is important to them. You may also have the opportunity to be introduced to other Realtors in their office. This method is just one way to bring in more business right now. Now back to the original question, is commercial lending right for you? Can you make more money by learning commercial lending and marketing to commercial borrowers, or will you do better by sticking with the residential market and finding ideas that will work for you? It's your decision, but make sure that you are aware it may be difficult. Good luck! Dan Sullivan is the vice president of sales and a managing director for Velma.com. Dan has served on the board of directors of the Idaho Mortgage Lending Association and is a current board member of the Idaho Association of Mortgage Brokers. He may be reached at (208) 854-7905 or e-mail [email protected]
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