The reason why most commercial mortgage deals don't get
funded is not because you can't find a lender. More often than not, the reason
can be traced back to the "presentation" of the loan request. For example, when
completing a residential loan, you fill out a 1003 using Point, Genesis, or
another FNMA 1003 program. For a commercial loan request, what do you fill out?
Since there is no uniform commercial mortgage
application, most brokers submit a 1003, an operating statement, and possibly a
rent roll. However, this would be akin to submitting only the borrower's tax
return and pay stubs, expecting a preliminary approval. In other words, it is
clearly inadequate.
"A
s lenders we see hundreds of loan requests, and most of these requests are incomplete and poorly prepared," says Chris Lewis, VP of Commercial
mercial mortgage
application, most brokers submit a 1003, an operating statement, and possibly a
rent roll. However, this would be akin to submitting only the borrower's tax
return and pay stubs, expecting a preliminary approval. In other words, it is
clearly inadequate.
"A
s lenders we see hundreds of loan requests, and most of these requests are incomplete and poorly prepared," says Chris Lewis, VP of Commercial Lending for Wells Fargo, Los Angeles. "Complete loan requests, however, go to the top of the stack as this shows that the broker understands the issues and has some control over the deal."
P
ackaging a commercial mortgage loan is significantly different than packaging a residential loan. The main difference is that you need to determine whether the property -- not the borrower -- is generating sufficient "rental" income to cover the mortgage payments on the proposed loan amount (e.g., DSCR), and whether there is commensurate value to meet the lenders' loan-to-value requirement (e.g., LTV).
To calculate the
DSCR and LTV, the stabilized net cash flow (NCF) must be determined. In most
cases, lenders must re-create the operating statements to conform to their
respective underwriting models, which requires identifying certain
property-specific expenses.
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