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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   August 2014

Team Up To Reach The End Goal

Originators should be seamless intermediaries between borrowers and lenders

Team Up To Reach The End Goal

As a commercial mortgage originator, you are a financial intermediary, and acting as a liaison between your borrower and your lender is your primary responsibility. You provide information to your client when appropriate and, in turn, submit documentation and information to your capital source while addressing any issues that may crop up. You do all of this, of course, to provide the best possible service to your client.

And, because being a financial intermediary is not a strictly altruistic endeavor, you also have a bottom-line objective: to earn a solid payday in the process. Accordingly, brokers usually strive to close as many loans as possible while earning the heftiest commissions available.

What may be surprising, however, is how often brokers unwittingly sabotage their own closing ratios and commissions — even their reputations in the lender  marketplace — because they become roadblocks to their prospective lenders.

One of the most valuable skills of a successful commercial mortgage broker is one not often discussed: knowing when to get involved and when to take a step back and ease up on the reins of the deal. Many bad habits of commercial mortgage brokers are ones of inexperience that tend to fall away as a broker becomes more seasoned and knowledgeable.

But a problematic practice sometimes exhibited by brokers, even tenured ones, is the determination to hang on to control of a deal at all costs. Some lenders report that they interact on a daily basis with brokers who refuse to allow them access to their borrowers because of fear that the lender will circumvent them. Just as frustrating for lenders are brokers who refuse to present a lender’s offer to the client because they have decided in advance that it is not acceptable.

Why should you, as a financial intermediary, care about lenders’ occasional frustration with a couple of “bad habits” exhibited by some of your professional peers?

Because, ultimately, these bad habits are actions that are potentially the most detrimental to the success of a loan transaction — your loan transaction — if you’re guilty of these traits without realizing it. In addition, they are two traits that may ultimately tarnish your overall reputation in the lending marketplace, with the potential to shrink that marketplace for you and your clients.

Let Go Of Fear

Many times, a broker’s fear of losing transaction control, also known as being “cut out of the deal,” is brought on by mortgage colleagues’ war stories about lenders that purportedly stole their borrowers. Such accounts are often exaggerated, however, or the circumstances misconstrued or misunderstood, especially by novice or untested brokers. As these tales move through brokers’ grapevines, they often become more colorful and less accurate, much like the whispered phrases in a grade-school game of telephone.

Certainly, there have been cases of unscrupulous lenders that snatched borrowers from their brokers, but businesses that engage in such practices usually don’t last long. In this Internet age, negative information about a lender is often quickly posted online to myriad sites that provide brokers and borrowers with outlets to share their loan experiences, good and bad.

The good news is that you’ll rarely come up against this type of unethical lender if you perform your due diligence upfront and conduct a quick but broad Internet search for any negative information about the lender you are considering. Remember that it’s not enough to check out the lender’s own website for client testimonials and reassurances; study reputable broker-community sites and mainstream mortgage-information sites, as well.

Once you’ve assured yourself that you are not dealing with a lender notorious for stealing clients, the next step will provide even more peace of mind so that you’re operating from a position of trust instead of paranoia.

Self-Protection

These days, many lenders encourage or direct their broker clients to execute a referral or business agreement that includes all of the noncircumvention and legal protection that any broker could hope for.

But what if your lender doesn’t offer such an agreement? Simply request that your company and fee be included in the lender’s letter of interest. If that is not possible, have your counsel draft a fee agreement to be signed by you and your borrower, with clear stipulations about the deal that you both feel comfortable with. This is always a good idea anyway, since it’s more likely that a borrower will refuse to pay a broker than a deadbeat lender.

If you’re working with a lender that you’ve determined is reputable based on your Internet due diligence, the lender will enter into an agreement with you and/or protect you in its deal documentation. With this agreement in place, coupled with a fee agreement that clearly outlines the broker/client understanding between you and your borrower, what is there to worry about?

Despite your best due-diligence and self-protection efforts, the truth of the matter is that if an unscrupulous individual or entity is determined to circumvent your role or refuse to pay you the fee you have earned, their determination will probably succeed no matter what degree of protective documentation you have in place. There is a certain extent of risk that a financial intermediary must accept to function as a commercial mortgage broker, and the most anyone can do is to institute protections and hedges against it, minimize it wherever possible and cultivate trusting relationships with lenders.

Follow the leader

With your protections in place, you may now turn your attention back to the level of your involvement in the loan process. Once your lender has shown sufficient interest in your transaction to want to move ahead, follow that lender’s lead to determine how deeply and how often you should be involved as the deal goes forward.

It may feel counterintuitive at first, but the easier you are to work with and the more hands-on you permit your lender to be with your client, the more your lender will lean on you for support and assistance. If your lender indicates a preference to work with your client directly throughout the process — keeping you in the loop, of course — it’s a good idea to get behind that process.

For example, if the lender requests a conference call to conduct an interview with your borrower, do not demand that all questions and documentation flow through you. The greater access your lender has to your client and the more accommodating you are perceived to be, the more quickly the transaction will proceed and the higher your loan will likely sit on the lender’s priority list.

Remember: When a broker becomes demanding and makes the transactional process difficult for the lender, that lender will be less inclined to be flexible when issues crop up and will be less hesitant to cut ties with both the broker and the loan on short notice if a better deal comes along.

Bridge or roadblock?

Not every loan you originate will close, and a seasoned broker accepts that reality of the business. In commercial lending, there is often fallout in deals for a variety of reasons, often ones out of your control. Your goal is to minimize the causes of this fallout wherever possible. If you choose to be a roadblock for your lending partners, you are likely to close fewer deals and foster a smaller number of lender relationships.

If, however, you opt to act as an efficient bridge between your borrowers and your chosen lenders, you will give yourself the greatest chance of career success. By providing easy access to your clients, cooperating with lender requests and following your lender’s lead to ease the loan process all the way down the line, you will become a broker that lenders want to work with. The result: more closings, better relationships and more satisfied borrowers. Who can argue with that? 


 


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