Mortgage Lender wanting to do Commercial

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Doing Commercial Loans
Posted by: lotusraee Jul 28 2004, 02:27 AM
I own a net branch of a Mortgage Lender in the state of CA. We are licensed in approx. 48 states. After 9 years of being on the residential side I also wanted to check into the Commercial lending side. I have a connection that can get 10-15 commercial loans a month. I have several questions on how to begin and hope someone can help.

1. Do I have to obtain separete licensing for commercial loans or can I work off the one I have?

2. Is it true that some states don’t require any license at all to do commercial loans?

3. What would be some negatives about the commercial business?

Is there a helpful website that can give me information on doing commercial loans?

Any information is greatly appreciated.
Posted by: loanuniverse Jul 28 2004, 07:59 AM

I can’t really speak to licensing issues, maybe one of the non-bank lenders here can give you some feedback on those points. However, if I had to pick something to say about commercial lending to someone coming from a residential lending background, I would say the following:

– Commercial loans are usually custom products. There is no 15-year and 30-year standard.

– When you start talking about bigger deals, credit score is not enough. You will need to get people with the skills and experience to underwrite the loans or quality might suffer.

– I assume that the plan is to expand into commercial real estate lending and stay away from business financing? If you do decide to offer a full spectrum of commercial loans that would need even more expertise.

– Even if you decide to keep your entry to commercial lending limited to commercial real estate, sometimes you will need to analyze the company/tenant. Specially if you have an owner occupied property.

– I think it would be fair to say that the secondary market for commercial loans is less liquid than that for residential loans. This brings the question of “can you fund those loans yourself?”.

– You can certainly improve your yield with commercial loans, but remember that the risk/reward relationship holds true.

The following are a couple of sites that have information about the tools used. Moody’s financial analyst is pretty much the standard for spreading financial information, and Omega has a great series of training books that are usually given to people at the start of their commercial lending careers. They are both on the pricey side so you might just want to wait and see if you want to get into the business first.

Good luck
Author: Commercial Loan Underwriter