New brokers might make mistakes, but a new referral option could help soften the blow

Jim Levie, co-director of commercial lending, The Mortgage Firm Inc.

As published in Scotsman Guide's Commercial Edition, November 2008.

Too many new commercial brokers simply pretend to know what they are doing.

This harsh claim commonly surfaces when residential loan officers handle their first commercial mortgages. Among commercial lenders, it's thought that the average commercial loan pull-through from a new broker is between 9 percent and 11 percent. This is incredibly inefficient and often frustrating.

It doesn't have to be. And a new referral and fee-split option could actually benefit all parties.

Common errors

It's no secret that brokers are entering the commercial realm from the residential side. It could be because they need the income or simply can't pass up the opportunity.

On the other hand, new commercial brokers sometimes lack the following:

• Training: This isn't necessarily residential brokers' fault. Many have been lulled by the simplicity of residential loan automation. They often must be trained to the "old-fashioned" discipline required to gather and analyze a loan file before submitting it to a lender.
• Sophistication: Seasoned commercial investors can smell fear in a commercial novice. These borrowers are often light years ahead of their residential counterparts. A residential broker can stumble with a first-time homebuyer and get away with it. Stumble and sweat with a commercial investor, however, and you're toast.
• Vocabulary: Residential brokers understand acronyms such as FNMA, USDA or FHA. But NOI? DSCR? OHMYGOSH. When it comes to the "alphabet soup" of commercial lending, new brokers can get lost.
• Selectivity: Sizing up potential loans takes practice. New brokers can spend too much time chasing improbable deals. For example, a stated-income, $90 million loan on an all-inclusive resort in Central America has little traction with the majority of domestic lenders.

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