Want your Loan Approved?

Far too many times as lenders we invest our valuable time, effort, and energy into a deal, only to have to later PASS on the file after uncovering suspect information about the borrower/property/deal in general. I ran across a great article recently that addresses this issue and wanted to post it for all consume. Though I can't take credit for penning it, I do agree with what's said wholeheartedly. It's applications reach across each and every program that we offer here at GMC and hopefully reading it will give you a better understanding and increased likelihood of closing your deals!

"Do you want your loan approved? There is something you can do now to enhance your chances. The mortgage industry has changed in the last few months. No kidding! The broker community has become a convenient scapegoat for all of the industry's ills. Loans were being approved per lender-provided guidelines, which, in turn, was a reflection of the secondary market's unrealistic expectation regarding infinite property appreciation. This translated into an unbridled rush for market share that ultimately lowered lending standards to a point where it seemed the dead, but not yet buried could qualify for a loan. Those days are over. The "no-brainer" programs are all but extinct, and even deals that should be easy, based on excellent borrower credentials, have become increasingly difficult. The guidelines keep changing, underwriting requirements are getting tougher and programs that existed at the time of the loan origination are disappearing mid-stream, often with no comparable program to replace them. Also gone, or going, are those that based their business purely on maximizing commissions while minimizing work. The surviving professionals will be the ones who stay current with changing guidelines, do their work thoroughly and, above all, take their responsibility to the borrower, as well as the lender, seriously. In the future, there are many things that we will need to do differently in order to succeed in the newly-emerging order within the industry. There is, however, one thing that can be done immediately, starting with your very next loan. Being given good loans to begin with will greatly increase your chances of getting clean, responsive commitments and help you close your loans more quickly.

Of course you want your loans approved!
Since you already spent the anticipated commission (at least mentally), you want the loan approval to come fast, without being conditioned to death. You do not want surprises. You invest serious time in your deals; so you also need and expect referrals from grateful clients to result from every loan you work on.

It is probably fair to say that the above describes just about every loan originator. Beyond this point, results begin to diverge for different cases and different originators. Some loans, even those that appeared easy at first, never seem to get off on the right footing. Others, however, sail right through and are cleared to close almost immediately without being subjected to condition purgatory.

Sure, some underwriters are not as experienced as others. Others may enjoy occasional power trips, becoming intoxicated with the ability to have mastery over another's destiny. However, these issues of incompetence and weaknesses in human nature are present in all professions and are something that we simply need to learn to live with, within reason. For the most part, the success of your borrowers' loans depends on how thorough your own work is and on your ability to communicate all of the relevant facts to the lender clearly.

Do your homework, earn your fee!
First and foremost, you are responsible for learning and knowing the requirements and relative benefits of the different mortgage programs. You meet with and collect all of the needed information from the client. You match the client's needs and qualification profile with available programs. You educate the client as to what he should expect and why the program selected is the best one for his needs, or the best one he can qualify for at the time. You must do the initial background/employment checks and reverse directory searches before the loan leaves your office. By the time you (and perhaps your processor) have finished preparing the paperwork, you are the expert in everything that pertains to this borrower and the loan package that is being assembled for presentation to the underwriter.

Finish the job, communicate!
Your final task, and perhaps the most critical one, is communicating all of the information in a fashion that makes understanding the case easy to a lender's underwriter, who is not clairvoyant, has never heard of the client and is not familiar with specific details that may be very relevant to the case at hand. There should be no room left for guesswork.

Clear communication begins with proper and accurate loan registration. Every lender has its own procedures and format that must be followed for properly describing the incoming deal. All required disclosures and documentation needed to approve the loan should be in the file from the start. Sloppy or inaccurate communication at this early stage may delay, or even lead to the unraveling of your borrower's loan. Once you have cleared this initial loan entry/registration stage, you can now proceed to communicate with the underwriter, or the undertaker. The one it will be is dependent upon the quality and accuracy of this communication!

The industry tries to make this communication easy and consistent by standardizing the submission forms and procedures. However, these only address the format of the presentation. For a "plain vanilla" deal, the regular 1008 form (or the Mortgage Credit Analysis Worksheet) and 1003 form can pretty much describe the case completely. For more complex cases involving multiple borrowers, several properties, multiple income streams, or situations involving complicated credit histories or hard-to-trace asset trails, your complete knowledge of guidelines and good communication with the lender will be the key to your client getting a clean approval! If the degree of complexity in a given deal causes the underwriter to spend extra time coming back to the case over and over again, this may lead to frustration and reduce the credibility of the loan application, as well as the submitting broker/originator. This is especially true when the perceived complexity results from incomplete, piecemeal or misleading information in the original submission. In other words, poor communication! In today's mortgage climate, when unemployed underwriters may outnumber employed ones, the underwriter is not going to take chances with loans that do not make sense!

The solution: More communication
In the commercial lending world, it is customary to provide a brief executive summary, which describes the key points of every loan submission. A well written executive summary can make the entire balance of the loan application—including complicated financials, income histories or specific property issues—much easier to understand.

This can also be a tremendous tool in residential lending! A note—a few brief sentences at the beginning of the file telling the underwriter what they are about to see and perhaps why the file is presented the way it is—may save many unnecessary phone calls and eliminate unnecessary conditions. It may even make the difference between a loan being approved or declined! This is especially true when something is missing in the original submission and will be sent in separately. This small, but helpful step will also build respect for the submitting broker or loan originator and will be remembered when the next loan arrives.

Conclusion
Our mortgage environment has morphed almost overnight! Most of the easy loans, which required little documentation, are gone. Going forward, we will be increasingly involved in loans requiring much more investigative detail to insure "investment grade" quality in order to be sold into the secondary market. This results in more documentation, guideline compliance issues and increased complexity. A well-researched, accurately-documented and properly-submitted file is now a prerequisite for a commitment that is not overburdened by conditions! A file that also communicates additional, helpful information to assist the underwriter is more likely to be approved quickly and earn you the respect you deserve for a job well done!

Serafim Ivask is a wholesale account executive at SunTrust Mortgage Inc. and has been actively involved in the residential and commercial mortgage industry, both retail and wholesale, for more than 20 years. He may be reached at (516) 650-3078 or e-mail serafimivask@optonline.net."

Serafim has written another article following this one which I'll post when it becomes available online. This article originally appeared in the Mortgage Press and can be found here.

Business Cash Advances

If you haven't seen it already, you're missing out on our newly introduced Business Cash Advance Program. We're now able to put cash in your clients' hands without any real estate as collateral. This program is able to leverage current credit card sales into cash by selling a small portion of their future credit card receipts to us. It's that simple!

In light of today's tightening credit markets, this program is a fantastic way to help merchants get much needed cash for their small business. These advances carry additional benefits such as:

• NO Personal Guarantees necessary
• Minimal Stips
• Fundings in 5-10 days
• Quick application. Takes only 60 seconds
• NO Fixed Paments & No Late Fees
• No Upfront Fees
• Broker paid 3-4% on every deal

The merchant is advanced a percentage of their monthly sales (typically between 50% and 250%) and then repays these advanced monies by having a portion of future sales deducted each month. Please note that higher advance percentages are available depending on the ratio of credit card sales to gross sales each month. Calculate a Maximum Available Advance now.

Any business generating a portion of their monthly revenues via credit card receipts can apply. Take a look at just some of the business owners we can help:

• Bar / Nightclubs
• Beauty Salons
• Dry Cleaners
• Gas Stations
• Restaurants
• Retail Sales
• Hotels / Motels
• Auto Repair Shops
• Day Care Centers
• Convenience Stores
• Nail Salons
• and so many more....

Funds can typically be wired within ten (10) business days and there are no up-front fees charged to either you or your clients. These funds can then be used for whatever purposed best suits your client, though we do recommend reinvesting in the business. Credit isn't the sole deciding factor, though can play a role, as extremely poor personal payment history could potential adversely affect the chances for success of the business.

We offer a weekly training session on this fantastic new product and loads more information is available on our website.

Commercial Appraisals

With the vast increase in commercial submissions we've seen lately, the question invariably gets asked... "Why are commercial appraisals so expensive and why do they take so long to perform?"

It's no surprise that the $2,500 to $10,000+ price tag can generate a little sticker shock from our broker clientele, as well as the end borrowers. It's also understandable that the 2-5 week timelines that these appraisals typically take can also be a bit alarming. Let's unpack the commercial appraisal process and spend a little bit of time exploring he differences between your average residential and commercial appraisal.

95% of all brokers have spent the majority of their time on the residential side of the lending fence and are well accustomed to $350 appraisals that can be completed in a matter of 3-5 days. They know the ins and outs of the process, and most importantly, can easily 'sell' their client on the cost, necessity, and benefit they'll receive.

It's important to realize that for a residential appraisal, the vast majority of information needed about the subject property is able to be found online and through public records. Comparable sales, photos, and online estimates of value are easily accessible and can be found without leaving one's office. Commercial appraisers must spend a signficantly increased amount of time in the field performing research compared to their residential brethren. Additionally, residential appraisals typically only consider the sales approach, where as commercial appraisals require additional analysis of both the income and cost approach.

Sales Approach

This approach, on the surface, is the simplest: find a similar property and see how much it sold for and when. Commercial properties, however, due to the dissimilar, complex, and varied nature make this process increasingly difficult. True comparable properties are typically not located next door, or sometimes even in the same town. Appraisers must scour numerous sources and typically spend greater amounts of time seeking out genuinely comparable properties -- unfortunately there is no 'Zillow.com' for the commercial world.

Income Approach

This approach seeks to determine a property's Net Operating Income and then extrapoloates this figure into a reflection of the properties worth using a given 'Cap Rate'. Unfortunately, true rents are an extremely elusive number that can typically only be located by contacting owners/managers of similar properties and attempting to extract a rent-roll from them. As you can imagine, calls of this nature from random appraisers are typically not the highest of priority for most business owners. After finally garnering this information, the appraiser must then visit each separate location and take multiple pictures of the comparable property to include in their report.

Cost Approach

The cost approach is exactly what it appears to be on the surface, an estimate of the approximate replacement cost of the building should severe damage (fire, wind, storm, etc) occur or demolotion be necessary. The appraiser will typically consult a cost-data book such as Marshall & Swift's Commercial Cost Handbook for a rough approximation of replacement cost per square foot.

Summary

Appraisals performed on commercial properties are more complex and time consuming in nature and as such, the individuals who are engaged to put together these reviews must undergo additional educations and licensing requirements. We require these field reviews perform by those with the MAI designatation, or Member of the Appraisal Institute. As a result of the numerous field visits, phone calls, and overall time spent researching the above-mentioned valuation approaches, hopefully one can see why commercial appraisals both cost what and takes as long as they do.