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   ARTICLE   |   From Scotsman Guide Residential Edition   |   November 2017

Earn Bigger Paychecks

Breaking into commercial lending can improve your bottom line

r_2017-11_butler_spotIf you’ve been a mortgage originator for any length of time, you’ve had your ups and downs in the business. Residential lending rules and regulations have risen to a record level of complexity, and compliance with Consumer Financial Protection Bureau regulations is nothing to sneeze at.

You may truly love the mortgage industry and find it rewarding, but those who have moved on to the greener pastures of commercial lending know it offers many pluses — one of the most significant being bigger paychecks.

Breaking into commercial lending is not as complicated as many residential originators may think — if you know where and how to start. If you want to steer your mortgage origination activities toward the commercial side, simply follow the steps detailed here.

Choose the right lender

The first step is to partner with a lender that accepts commercial deals using a “residential style” submission package — meaning a 1003 application, credit check and a simple property rent roll. Stay away from complex documentation requirements, executive summaries that take experience to perfect, and convoluted loan packages. 

When choosing a lender, a good account executive, or AE, can make all the difference. Your AE is at the forefront of your deals. This person will drive and guide your deals through the lender’s team of managers, underwriters, processors and, ultimately, decisionmakers.

AEs don’t have the final say in whether a deal gets done or not, but the process will go much smoother if you have an AE you enjoy working with and who knows how to get deals done. A good AE can prevent problems in file submissions before docs get to underwriting. This translates to more funded deals.

Once you have a good lender, look for deals that fit that lender’s underwriting guidelines. This streamlines your marketing and makes it easier to focus on clients that can generate fast results. Rather than trying to learn loan programs from multiple lenders and then having to figure out what each lender needs when you get a prospect, make it easy on yourself and market a single lender’s products under your name.

As your pipeline begins to fill, work on document efficiency. The faster you can provide the underwriting team with the documents needed for a loan, the faster your deals will close. In commercial lending, the appraisal is often the big hang-up in timing. If it takes two or three weeks to get loan docs to the lender, another three to four weeks for the appraisal and then processing time for post-appraisal reviews, your paycheck can get delayed by a month or more.

Know what documents you need, get them all from your borrowers up front, make sure they are accurate — no missing signatures or omitted crucial information — and send them to your lender in a timely manner. This will greatly speed up your closings and get you paid sooner. If paperwork is not your forte, hire someone to help get it done.

Once prospects come in the door, treat them right all the way to closing. 

Finally, be loyal to your lender. A lender that consistently funds your deals, combined with an AE you trust — a good AE is essentially your business partner — is the perfect match. Don’t shop your deals around. Stay where you have good support. It’s much easier to fill your pipeline and churn out closed deals when you have a solid team in place that you trust to get it done. Instead, work on building your volume and that loyalty will pay off in your bank account.

Find a partner

If the commercial side of your business gets a bit overwhelming, seek a partner. Commercial and residential deals are like apples and oranges: They are highly different from one another in how they are analyzed, what documents are needed to get them funded, and the timing of the whole process.

Combining your talents with another professional who is more familiar with the commercial market may be a solution. Look for someone who sees the benefit of teaming up and whose personality and work ethic match your own. 

Perhaps you are good at marketing and finding prospects. Maybe your partner is good at speaking the commercial language to borrowers and/or handling the processing. Whatever your arrangement, just be clear about who is doing what and how you each get paid. Generally, neither partner makes money unless deals fund. After that, be fair about how you share commissions and honor the agreed-upon split.

You might even enjoy working with another professional on deals more than going it alone. Commercial lending can be less overwhelming when you have the right person to learn with.

Learn on the job

 

Key Points

Nine steps to commercial mortgage-lending success

  • Find a commercial lender that accepts “residential style” submissions.
  • Work with a good account executive.
  • Look for deals that fit the lender’s underwriting guidelines.
  • Become document efficient.
  • Be loyal to your lender.
  • Seek out a partner if you get overwhelmed.
  • Learn the ropes as you go.
  • Market yourself and your lender’s products.
  • Provide great service.

Speaking of learning, if you think you can learn all there is to know about commercial lending quickly, it’s not going to happen. You simply have to start and learn as you go. It will take years of work and many closed and dead deals to gain a complete understanding. Every transaction is different, and only after repeating the process over and over again will you start to understand what to throw out, what to keep, what to look for and what not to waste time on.

Make no mistake, however. Starting is the most important part. This is a specialty you learn by doing. Yes, you can get training. You can read and study and get tips from lenders and colleagues, but hard-core understanding of funding commercial deals comes by doing. The larger loan sizes and fatter commission checks mean it takes fewer loans to earn a nice living compared with residential mortgages, but a lot more also can go wrong. Commercial mortgages are less predictable.

The way you keep moving is to keep bringing in new deals, keep your pipeline full and, like any other job or profession, do your best and work smart. There is always something new to learn, even after decades in the business. Don’t let that stop you. Consider it a challenge to go to the next level in your career.

Find commercial clients

Networking, marketing and meeting with prospects are the keys to filling your pipeline with deals. Get out there and let people know you do commercial loans. This is where it is important to know which commercial loans you can offer and to whom — based on the criteria of your chosen lender.

Good old-fashioned cold calling is a great way to get new business. Place online ads, attend investor meetings and events where a funding source is needed. Reach out to past borrowers to see if they own investment or commercial properties. Have business cards printed and hand them out whenever you get the chance.

You also should create a new commercial website or update your old website to include the commercial side of your business. It all adds up at the end of the month. You need to use multiple sources and methods to get deals coming to you. Once you hit what works, do more of that.

Providing great service also will make other professionals want to work with you and increase your referral business. reputation of good service takes time to build, but can happen faster than you think if you stand above the competition in your responsiveness to prospects.

Once prospects come in the door, treat them right all the way to closing. Be upfront, honest and forthright. If there is a problem, say it. Don’t hide problems that could blow up your deal. Ask questions and provide solutions. Follow through with what you say you will do, and don’t make promises you can’t keep.

These traits will make you stand out in a crowd of originators as a professional who can be trusted with commercial business. Who knows, at some point, you may decide to leave the residential side of the fence and stay on the “greener side” for good.

•  •  •

Is commercial mortgage lending for you? Only you can answer that question. Partner up and try a few deals and see where it takes you. This time next year, you could be thankful for a lot more than just a good turkey on Thanksgiving.


 


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