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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   April 2005

We Were There: Lessons Learned at MBA CREF

The Mortgage Bankers Association (MBA) held its annual Commercial Real Estate Finance (CREF)/Multifamily Housing Convention and Expo this past Feb. 6-9 in San Diego. Mortgage brokers from around the country were there to interface with their underwriters who were keen for new commercial-loan business. Several aisles of booths contained bankers/financiers speaking with people about their loan products, most with their geographic preferences and funding limits.

The atmosphere was positive and filled with some assertiveness. Seasoned mortgage bankers shared ideas at serious roundtable discussions and barroom scuttlebutts, but the overall attitude was that 2005 will be a good year. There is a lot of concern that caps have been driven too low. However, no one is stopping the funding out of fear that “your competitor will do the deal if you don’t.” Banks also are eager for new commercial loans to add to their portfolios. General economic fundamentals are good, and money still is historically cheap. However, each submarket presents its own pros and cons.

Many traditional commercial banks attended, and they offered loans with various parameters, including:

  • Back-end compensation: Commercial-loan officers traditionally have received commission through origination fees charged upfront. However, as is common in residential lending, some bankers now offer loans where the borrower has a choice to pay a higher interest rate with no origination fee, with the underwriting institution compensating the commercial-loan broker directly, or pay a lower interest rate but approximately a 1-percent origination fee or more, as has been customary for commercial-mortgage lending.

  • Long-term financing: Several conduit lenders and life-insurance lenders joined defeasance companies and mezzanine financiers to offer more creative capital for unique situations. That could include participating in the asset, senior and junior debt and equity or customizing capital.

  • NINA commercial mortgages: Another variation of a traditional low-loan-to-value product in residential-mortgage brokerage is a No Income, No Asset (NINA) commercial mortgage. Sixty percent to 70 percent of debt is possible if the property, personal credit and experience are decent. Due diligence of financials, including the property’s latest rent roll and historical financials, is not verified.

  • Private money: Some hard-money lenders called themselves “soft hard money.” They marketed themselves as charging lower origination and interest fees — 2-percent to 3-percent origination and 9-percent to 12-percent interest-only payments. Regular “hard hard-money” lenders also attended.

  • Niche-filling: One company visited from India and demonstrated the potential financial benefits of outsourcing transaction managers, loan production and post-closing services. Other attendees were small-business bank specialists. A few lenders touted their abilities to go for “outside-the-box” products — from restaurants and gas stations to casinos, churches, marinas and golf courses.

The list goes on.


 


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