WHAT YOU SHOULD KNOW BEFORE
SIGNING A LOAN APPLICATION
current loan balance if the borrower
needs cash for other emergencies
or wants to take advantage of an
opportune acquisition. Expect loan-to-values to be in the 60 to 70 percent
range, rates to be between 10 to 14
percent and fees anywhere from two
to five points. Terms are normally
from six months to two years. These
loans are typically paid off after the
property stabilizes and the borrower
sells or refinances the property. They
can fund as quickly as one week but
two to three weeks is the norm.
If this is a refinance, make sure to review the note to confirm the
maturity date and when you can prepay at par or with minimum penalty.
If it is a CMBS loan, make sure of the maturity and the open at par period
because if you have defeasance versus yield maintenance, even for 90 days,
the cost may be prohibitive.
Before you sign a loan application, make contact with the servicer or
lender and have them e-mail you a payoff letter confirming the payoff amount
and when you can do so. For example, some loans must be paid off on a
specific date, say 12/06/11. If not paid on that date, you will have to wait 30
days or pay a full month’s interest.
If the loan is past maturity, be sure you are in contact with the special
servicer or lender to let him know you have a lender willing to provide the
financing. He will probably still charge late fees and default interest but at
least he knows you are working on it.
GOING IT ALONE?
Working directly with a lender can
reduce the amount of fees you pay. If
you have a strong relationship with
a bank, then you should talk to them
about your loan request first. If they
deny your request or say that the loan
amount and terms are not sufficient,
then it will probably make sense to talk
to an experienced mortgage broker.
Most life insurance companies
only work through correspondents,
so in order to get a quote from them
you will have to go through their correspondent mortgage broker in the
region.
It’s possible to go to the CMBS
lenders directly but if you don’t have a
relationship with the new loan officers
(most were let go several years ago)
then it makes more sense to let the
mortgage broker talk to them; the broker knows what the lender is looking
for and usually has a better relationship with them because the broker
sends the lender numerous deals to
look at on a regular basis. The broker
It’s always a good idea to know this information upfront, and not 15 days
before closing, to avoid surprises.
can also get you several term letters
from different lenders for review.
You can also go to a private lender
directly. If you have a local private
lender that you personally know, or a
friend who has used a private lender
before with success, then give them
a call. Be careful when calling private
lenders you don’t know, however;
this side of the business is not regulated and if you don’t understand
how they underwrite the numbers,
you may be in for a big surprise.
Using an experienced mortgage broker will eliminate most of these concerns because the broker likely has
established good relationships with
credible lenders.
IT’S ALL IN THE PACKAGING
The key to maximizing the loan
amount and getting the best terms
is to present the lender with a well
thought-out loan request package.
Lenders are overwhelmed with loan
requests today and they want to focus
on the deals that require the least
amount of time. If they don’t under-
stand your request or if there is miss-
ing or incorrect information in the
loan package, they probably will put
the deal behind other requests that
they can quickly review and quote.
Brad Cox, CCIM, CPM ( bcox@tdwood.com), is senior vice president at Thomas D. Wood & Company,
a Florida-based mortgage banking firm representing mostly life insurance company lenders.
