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   ARTICLE   |   From Scotsman Guide Residential Edition   |   April 2016

Discover a New Frontier

Residential originators can bolster business by capitalizing on small-balance commercial loans

Discover a New FrontierYou can’t control the environment of today’s evolving residential mortgage market, but you can control how you adapt to change.

Diversifying your business with small-balance commercial mortgages is a great way to forge new revenue streams from products your competition isn’t offering. Best of all, you can leverage your residential lending experience and database to help you grow your commercial business.

With the Mortgage Bankers Association forecasting a commercial and multifamily origination increase in 2016 of 3 percent, to a record volume of $511 billion, you have a real opportunity to position yourself as an expert to borrowers seeking a small-balance commercial mortgage loan. There are several ways to get started in this field.

First steps

One of the biggest differences between commercial and residential lending is the sheer number of diverse commercial property types. To give yourself an easier start, focus your initial efforts on small-balance multi-family deals. This real estate is most similar to the residential properties you work with today.

Some small-balance commercial lenders go the extra mile and structure their programs with residential originators in mind. These streamlined programs allow you to get started even if you’re unfamiliar with the intricacies of commercial lending.

Commercial lending involves terms and formulas not found on the residential side, like debt-service coverage ratio (DSCR) and net operating income (NOI). Before you start looking for your first deal, be sure to learn as much as you can about commercial property types, the documentation involved and the transaction process in general. Commercial lenders can be a good educational resource; ask them to point you toward effective commercial lending workshops and trade shows.


The commercial lending market is comprised of many private and agency lenders, and each one offers programs designed for a certain type of borrower. Make it your goal to understand their strengths and weaknesses, then build a stable of lenders so you can serve a wide range of commercial clients.

As you start to market yourself in the commercial world,
consider a more targeted approach.

As you start your search, keep an eye out for lenders that emphasize broker support. They are more likely to offer training programs and useful marketing tools to help you build your business. Commercial transactions can be confusing to even the most seasoned commercial broker, so a lender that helps you throughout the process is an invaluable asset.


You may not know it yet, but you have a wealth of potential commercial borrowers within your existing client database. Think about your residential borrowers who also own commercial properties. You have an opportunity to strengthen your relationships by securing funding for their homes and businesses.

As you evaluate your existing customer base, take the following steps to identify potential commercial borrowers:

  • Look for refis. Go through your closed residential loan files and check the real estate-owned section for refinancing opportunities — such as borrowers whose balloon notes are coming due or investors looking to cash out their equity for better leverage.
  • Note your borrowers’ jobs. Scan the “Occupation” section of Form 1003 loan applications for small-business owners, self-employed individuals and professionals with their own practice who may be interested in purchasing their business location. You also will want to identify those who already own commercial property, because many are looking to tap into their equity for cash that can be used to invest in the growth of their business.
  • Talk to referral partners. Accountants, financial planners, Realtors and developers come across plenty of commercial opportunities. They just need to know you are ready to do business. You also can establish new referral relationships with bank loan officers so you can capture their turndown business.
  • Work with your lender. Once you establish a strong referral network, talk to your lender’s account manager to create marketing collateral that broadcasts your strengths as a commercial broker. Some commercial lenders provide templates that you can customize and distribute throughout your network.


As a residential originator, you may be used to marketing yourself as broadly as possible to reach the biggest residential audience. As you start to market yourself in the commercial world, consider a more targeted approach. With so many different commercial property types and borrower profiles, many originators find success when they carve out a niche for themselves and promote their expertise.

Your lender can help you create a marketing strategy for your business, but you also can take some important steps yourself. First, add commercial mortgage lending to your e-mail signature and the bio section of your social media profiles. Your network will start to send you commercial opportunities once they see you are ready to transact.

Along with adding it to your social media bio, consider expanding your network of potential business partners by solidifying your presence on popular platforms like LinkedIn, Facebook and Twitter. Industry group pages are great places to connect with potential referral sources and get helpful advice from commercial colleagues.

In addition, make time to attend an industry trade show or conference. Bring plenty of business cards and make a point to introduce yourself to the many lenders with booths on the main floor. These events also provide great opportunities to connect with new referral sources and fellow mortgage professionals.

• • •

Diversifying your business with small-balance commercial lending will help you protect your bottom line in 2016 and help you adapt to change in the future. If you identify the right lending programs and set realistic expectations, you can capitalize on small-balance deals no matter how unfamiliar you currently are with the commercial market. 


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