“Show me a property that’s free and clear (one that that’s not have an existing mortgage lien) and I’ll show you a loan.” Mortgage loans, and especially commercial real estate loans, have more moving parts to them than Boeing 747’s.
At any point in the workflow process, something could be discovered that destroys an otherwise good loan because it was not disclosed in the beginning. High quality loan producers make it a point to find out ALL of the deficiencies in the loan transaction at the very start of the process. I have always been in awe of the people that make a 1/2 million and more per year in the lending business. I’ve noted through the years that one substantial trait that they possess is the ability to separate the good loans from the great loans. In this economy the loans that are actually funding will be the great loans.
Whenever I make the statement above to a crowd, the room comes alive. I realize (that sometimes) borrowers lie. For those of us in the lending business, this sometimes comes as a surprise and we go home at night depressed, angry, and we go through a lot of dogs. All kidding aside, the great loan producer will produce a great outcome by becoming a great question ‘asker’. I know that when my wife asked me why I just got through the front door at 3 AM this morning, that there is absolutely no answer that I can give her that will satisfy her curiosity as to where I’ve been or what I’ve done. The part that really surprises me is that a loan officer will believe the borrower when they say that their property has appreciated by 200% in the last 12 months and do nothing to question that key issue. I am also surprised when borrowers claim they make $35,000 a month, and the loan officer includes this information on the loan application, that in fact after months of due diligence the borrower may only make $1000 a month or some other ridiculous number. The best advice that I can give any loan originator is to behave like my wife; she asks some of the best questions that have ever been created. I’ll guarantee you that she knows how many gallons of gas I used my car last week BEFORE she evens asks the first question. Know what the answer should be BEFORE you ask the question and you will graduate into a high quality loan producer.
“The moral to the story is that the times when a loan officer can make up any story in a borrower can tell any story and have the true facts go undiscovered are ancient history.”
Now back to another key issue: the real estate collateral otherwise known as the subject property. If I die tonight, the best piece of advice that I can give you is to work on GREAT properties. What I mean by this, is work on those properties that any investor or any occupant would like to own. I’m sure that we’ve all driven to the slums of one of our favorite cities and looked around and wondered why a business would want to operate there. If you have any inclination that this would be the case, then I suggest you keep on moving. The highest-paid originators will concentrate on high quality real estate transactions that will not produce issues during the appraisal process. Appraisers in the commercial world are extraordinarily qualified to observe deferred maintenance and neighborhood types of issues that would preclude excellent building performance. I can absolutely guarantee you that the appraisal process will catch 99.9% at these sorts of issues. I cannot express to you how tired I am of loan officers complaining when the value of their subject property comes in at one third or one half of what they thought it would be. In almost each one of these cases, the source of the problem can be traced back to the loan officer or the borrower; then becoming outraged (enraged, angry, etc) because their property does not prove to be worth what they WISHED it to be worth. Maybe I could click my heels together (Wizard of Oz reference) and get the value to equal what I wished it would be that it’s just not the way it works.
High Quality Loan Production = High Quality Borrowers and High Quality Collateral
Everything else will usually turn into a waste of effort. End of Story
