New Commercial Lending Initiatives


Things are changing in the area of commercial mortgage lending. Some commercial lenders have introduced a new, innovative, residential-style approach to commercial mortgage lending. New programs provide an alternative to bank financing that is ideal for strong borrowers seeking loans from $100,000 to $1.5 million. These are very attractive to borrowers, brokers and easy for both to arrange. Owner occupier and investor properties are eligible.

Loans are available on a range of property types including multi-family, mixed-use, office and retail, and range from $100,000 up to $1.5 million, for purposes of rate/term refinance, cash-out refinance or purchase.
Credit scores of 580+ are acceptable for primary borrowers or primary guarantors.
High Loan To Value mortgages (LTV) for eligible property types, up to 97%

Several term options are available, each of which is fully amortizing:

- 6 Month Adjustable: This loan adjusts every 6 months by adding the loan's margin to the Wall Street Prime at the time of closing.

- 2 Year Fixed: The interest rate at closing stays fixed for 2 years and then adjusts every 6 months by adding the margin to Prime at each adjustment.

- 3 Year Fixed: The interest rate at closing stays fixed for 3 years and then adjusts every 6 months by adding the margin to Prime at each adjustment.

- 7 year Fixed: The interest rate at closing stays fixed for 7 years and then adjusts every 6 months by adding the margin to Prime at each adjustment.

- Declining Fixed Rate: A bonus offering - a conventional Fixed Rate with 15, 20 or 30 year terms and a unique feature. Although the interest is fixed for the life of the loan, the rate will drop by .500% every 5 years as long as the borrower maintains an excellent payment history. The loan must be current at the time of closing.

- Interest Only: The loan is amortized over 30 years to make the payments reasonable but the borrower makes interest only payments for the first 3 years, after which he pays principal and interest on the remaining balance. At the end of a 10 year period, the balance is due and must be paid off or refinanced. It is available only to A credit borrowers.

Blanket mortgages are also available.

Key Benefits include :

48-hour pre-approvals, Most rates locked at pre-approval, Streamlined underwriting, Subordinate financing, Quick closings, Multiple pricing options, Minimal costs, Long terms, No lender points, no yield maintenance and no loan committees.

Commercial properties are divided into tiers (1 to 4) for eligible property types :

Tier I Properties
Multifamily - Structures containing five or more dwelling units. Properties that offer weekly or monthly housing would not be considered multifamily properties.
Mixed-use - properties must contain at least one commercial unit (retail, office etc.) and at least one residential unit. Common types of mixed-use properties include a ground floor retail or office unit with apartment(s) above, all within the same building. The primary use at the property must be for residential purposes in order for it to be considered Tier I mixed-use.

Tier II Properties
Automotive - auto repair shops, used car lots, quick-lube facilities, tire repair shops, etc. The type and size of building will vary with the use.
Bed & Breakfast - inns are residential-type buildings designed for transient boarding and are family style in character.
Light Industrial - is characterized by a small size facility where no heavy manufacturing or specialized industrial process takes place. Office space within light industrial ranges from 3% to 25% of the total area.
Mixed-use - properties must contain at least one commercial unit (retail, office etc.) and at least one residential unit. If the primary use at the property is for commercial purposes, the property will fall under mixed-use Tier II guidelines.
Mobile Home Parks - are considered as long as not more than 25% of the total spaces are used for RV. Mobile home parks vary in quality and amenities and all will be considered unless the RV component is too high.
Office buildings - are buildings designed for general commercial occupancy and are normally subdivided into smaller units. Office use implies a general business use that does not include retail, manufacturing or warehouse type operations.
Retail buildings - are designed for retail sales and display and usually have display or decorative fronts. This retail classification encompasses a wide variety of uses including, but not limited to: markets, convenience stores, drugstores, department stores, big box retailers, barber shops, laundromats, etc.
Self Storage - Mini-warehouses are warehouses subdivided into a mixture of cubicles of generally small size, designed primarily to be rented for small self- storage or noncommercial storage and may include some office-living space.
Warehouse - buildings are designed primarily for storage purposes.

Tier III Properties
Flagged Hospitality - Hotels with national franchise affiliation are considered "flagged." Hotels must be in good standing with their affiliated franchise to maintain this tier.
Funeral Homes - include those used for viewing purposes as well as those that include embalming services.
Industrial - Where the principle structure is designed for manufacturing processes, heavy assembly or involves the use of heavy machinery. It contains an average amount of office space commensurate with the quality of the building and the intended use. Their heavy frames, walls and floors, specialized manufacturing processes and power or utility-service characterize industrial facilities.
Rooming House - Occupancy is more transient. Rooms are rented on a daily, weekly or monthly basis and usually only include a bedroom. Most rooming house properties contain less than 20 units.

Tier IV Properties
Day Care Centers - are early childhood, handicapped, adult, and senior care facilities; or developmental centers, such as kindergartens, nurseries or children's preschools.
Gas Stations - automotive properties or any other property that dispenses any amount of fuel for retail sale.
Health Care - Assisted Living or Nursing Home types of operations where a license is required to operate the business. Hospitals and medical treatment facilities, such as out patient care or walk-in emergency medicine.
Restaurants - cafeterias, bars, and taverns, where design is of restaurant type.
RV Parks - are those that are designed for recreational vehicles. May include mobile home pad rentals but will be considered an RV park if 25% or more of total park is for RV. Transient type occupancy is common.
Unflagged Hospitality - Hotels or motel properties with no national franchise affiliation are considered "unflagged."

The lower the tier, the higher the LTV permitted on the loan.

Underwriting favors a strong borrower, in terms of credit score and personal financial strength, rather than property cash flow - a residential style approach to commercial lending.
This common sense approach to underwriting creates flexibility. The primary focus is to establish the borrower's ability to repay the loan by drawing upon all income sources, not just the property. As a result, there is no minimum property debt service coverage requirements and are therefore, able to finance properties that may not pass traditional commercial underwriting guidelines.

Also, underwriting is streamlined and fast - the residential style of underwriting keeps the process easy, providing written pre-approvals within 48-72 hours of receiving a completed loan application and a commitment to funding loans quickly (within 30-45 days).

For requirements, borrowers need to be willing to document all income sources and provide documentation such as tax returns and bank statements. Every loan must have the borrower sign a personal guarantee.

In summary, new commercial loan techniques allow a far more flexible, cost effective approach than traditional banks or financial institutions offer. Businessmen can at last escape balloon payments which may previously have been the only financing option available. Contact Steve Consterdine at http://www.mycommercialloanspecialists.com for more information.