As published in Scotsman Guide's Commercial Edition, February 2005.
The future for commercial mortgage lending looks bright. Commercial loan production is booming. Capital gains tax cuts will continue for at least four more years. Business conﬁdence has returned, and the economy is kicking into high gear.
According to the Mortgage Bankers Association, commercial and multifamily mortgage loan originations are on the rise, up nearly 20 percent in the past year. Leading the way are multifamily properties(with 40.8 percent of the total originations), followed by oﬃce properties (24.3 percent) and retail properties (18.1 percent). Additionally, a poll by commercial real estate consulting company Colliers International shows that 82 percent of investors believe President Bush's re-election will boost the nation's already favorable commercial real estate market with a continuation of the administration's capital gains tax cuts.
Despite this exceptional outlook, some mortgage loan oﬃcers are reluctant to venture from the comfort of their residential routines into the unfamiliar world of commercial mortgage lending. Among their more common concerns are uncertainty about the market's income potential and the diﬃculty of the commercial mortgage process.
For those willing to explore mortgage production opportunities outside their comfort zones, one of the simplest ways to begin is with small-balance commercial mortgages. These are typically loans of less than $1 million with a loan-to-value ratio of 70 to 80 percent. The properties are often generic types such as multifamily, oﬃces, retail, mixed use and oﬃce warehouse.
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