My New Blog

The value of a mortgage broker was proven to me again last month when we were approached by a client who owns a large apartment building in San Mateo County.

This client has a first and a second loan on the property, and had approached several banks to assist with his refinance. All of these banks (Citi, Chase and Wells as I recall) felt that his loan size was too large compared to his property value (loan to value in other words) and were concerned about his ability to debt service (debt service coverage ratio) the new loan.

I love loans like this. First of all, the client understands at this point that his situation has some challenges. Secondly,  however, it gives me a chance to demonstrate my knowledge of the local market and local lenders and - at the same time - justify my role in the eyes of the client.

Because the commercial lending market has gone through so many changes, a knowledgeable mortgage broker can make an enormous difference in a transaction. Every commercial loan lender makes their own rules. Each bank, and every lender has their own strengths and weaknesses, their niches, and their own target markets.

After putting the client's apartment building through a thorough analysis, I was convinced that I knew of one local San Francisco Bay Area bank that would work with their situation. This is a bank that emphasizes cash flow, and global cash flow, and debt coverage, but cares less about LTV and less about the age and condition of the property. (I have had actually had banks say "no interest" in loans - after looking only at photos...).

Fortunately, this bank was a perfect fit for this client. The loan is approved and I expect the file to close in the next few weeks. The savings in interest expense alone will save the client many thousands of dollars every year.

We took a situation where the client was seriously concerned about the profitability of the property - his interest payments, especially on the second loan, were extremely high. When completed, this property will perform like a race horse and spin off nice cash flow for many years to come.

So the client is now a big fan of this Bay Area bank, and showed some interest in taking another large commercial building that he owns to this same lender.

Interestingly, however this building has a completely different profile. This same bank would do the loan, but so would many of the other banks and lenders that I work with. We work with several credit unions and insurance companies, and in my opinion this other larger San Francisco commercial building would qualify for loans at lenders that offer even lower interest rates.

Which proves my point once again; there is no such thing as a "go to" bank. Each property, each building, each client, need to be carefully analyzed and matched with the right lender for their situation. A good mortgage broker brings not only the ability to package and present your property in the best possible light; but also the knowledge of who to present the package to....insurance company, credit union, local bank, regional bank - they all have their strengths and comfort zones.