Financing: dead or alive?

Where has the mortgage market for commercial mortgages gone? It's lurking out there but keeping a very low profile. A sizeable number of lenders are out in the market for a while. Those that are in the market can pick and choose and call the shots.

We all know why so many out of the market. These lenders are in the rear of their caves licking their wounds, organizing and operating costly "Intensive Care Divisions" (although under fancier names). They are also wishing they had been more realistic, placed less emphasis on loan production goals and been less creative. There are those who now feel that the so-called creative financing techniques may have caused more problems than they solved.

So what guidelines are being used by those lenders in the market? Put very simply, they are looking more carefully at the old familiar basics such as more equity, lower loan-to-value ratios, more attention to tenant credit, higher vacancy and management factors and less reliance on long term guessing in the form of Discounter Cash Flows that helped put many very sophisticated lenders in trouble.

One may well then ask what can the Mortgage Broker do to help. In order to survive, the enterprising broker who used to concentrate in a small circle of lenders, has had to expand his lending contracts. Now, more than ever, he must know who is in the market, who likes that type of product and what terms can be expected. Its the broker's obligation to guide the borrower from an unrealistic loan request and thereby not waste time for the borrower, lender and broker.

In summary, the commercial mortgage market does exist but with strict underwriting standards. The borrower must have patience and be prepared to furnish much more data than before. The broker should be the catalyst and advisor to both parties.