Take advantage of the shrinking divide between residential and commercial lending
MIAMI – December 7, 2007 – – As mortgage professionals face a historically challenging residential mortgage market, industry experts and observers are suggesting a “back to basics” approach to survive the crunch in the months ahead.
Adapting to change is nothing new for mortgage industry veterans who have previously weathered storms in the cycle. However, recent reports indicate that 62 percent of mortgage brokers have worked in the industry for seven years or less, which means the majority of originators is facing its first major cycle in the business. Regardless of experience level, there’s opportunity right now for mortgage professionals who have established a practice built on strong customer relationships, a high-trust sales approach and a diversified portfolio. More than ever before, consumers will look to these trusted professionals to meet their needs.
One commercial real estate lender that has been courting residential mortgage brokers to diversify for more than four years says its message has taken on a new level of importance in recent months. Silver Hill Financial, a nationwide small-commercial lender offering financing through mortgage brokers and correspondents, designed its program to mimic the residential loan process and ease the transition into commercial lending for residential brokers (www.silverhillfinancial.com/nextstep). The lender has earned a reputation for its in-depth training across the country and convenient online learning options.
“In today’s market, it is unrealistic for residential mortgage brokers to ignore the opportunities in commercial. Beyond a survival strategy, small-balance commercial is a viable, profitable and sustainable line of business to build upon in your portfolio for the long-term,” says Salomon Wancier, Senior Vice President of Marketing Communications for Silver Hill®. Small-balance commercial typically refers to loans up to $5 million, although some define it as less – $100,000 to $1.5 million for Silver Hill. Wancier says that many of his company’s customers have taken their business to a new level by carving a niche in small-commercial lending.
Survive and thrive
So why haven’t more mortgage professionals taken advantage of the $130-billion small-balance commercial market? According to third-party research commissioned by Silver Hill, mortgage professionals nationwide selected small-balance commercial loans as the second-ranked product to replace diminishing residential business in March 2006; the same study in May 2007 found small-commercial as the top choice among brokers nationwide. But the 2006 and 2007 Lending Market Surveys also suggest that brokers’ greatest obstacle to engaging in commercial transactions is lack of knowledge.
“While we’ve seen growth in brokers’ interest since inception, 2007 has marked record increases in attendance for our online learning and live training across the country. Our research supports the fact that a majority of mortgage professionals want to grow the commercial part of their practice; we’re focused on equipping them with the knowledge they need to be comfortable taking the first step,” notes Wancier.
Easing the transition
Experts at Silver Hill set straight some common misconceptions about small-balance commercial lending, offering the following tips that mortgage professionals can use today.
- You do not need commercial experience to add small-commercial products to your portfolio. “Many of our customers have only offered residential mortgages previously and close their first commercial deal with us with little training,” says Wancier. “We use familiar residential forms and a process designed to give residential brokers an instant comfort level with commercial transactions.” The lender offers a variety of training options from introductory to advanced, available online or in-person across the country. “In just a few hours, mortgage professionals can be knowledgeable enough to submit their first multifamily commercial deal,” Wancier notes. “We walk them through the entire transaction and handle all the details so they can focus on communicating with their client, the borrower.” Mortgage professionals can find out more at www.silverhillfinancial.com/nextstep.
- You do not need to go out and find new clients for commercial loans. In fact, most mortgage professionals readily find commercial clients in their current book of residential business. Wancier suggests brokers look through closed loan files (1003 form) for Real Estate Owned (REO) and occupations such as doctors, plumbers and dentists. “Business owners and entrepreneurs can potentially benefit from owning versus renting, or refinancing commercial property they already own. We’ve found that these individuals are often unaware of all the financing options available to them ? for example, low-down payment commercial loans for strong borrowers or unrestricted cash-out refinance loans. Many brokers find business just by getting the word out.”
- Commercial does not require a different skill set than residential lending. While this may be true of “big-balance” commercial deals, it is not the case with certain small-balance commercial programs. “Mortgage professionals use the same sales skills in small-commercial as they do in residential and have to manage customers’ expectations. Yes, they have to learn the fundamentals of commercial lending and know the program they’re offering, but the differences are small and very trainable. Brokers can leverage their past experience and client base for rapid success in small-commercial lending by just tweaking what they already do. Small-commercial is incremental business that mortgage professionals can find through referral partners, from current and past clients, and by tweaking their marketing efforts. They should be able to handle the small-commercial deals that cross their desk rather than referring them to someone else,” Wancier advises.
“Small-balance commercial is a natural extension of a successful residential mortgage practice,” concludes Wancier. “For mortgage professionals dedicated to high-trust client relationships, small-commercial should be part of the product mix that allows them to build a more robust practice, serve more borrowers and ultimately survive the storm.” For more information, mortgage professionals may visit www.silverhillfinancial.com/nextstep.
About Silver Hill Financial, LLC
Headquartered in Miami with regional offices throughout the country, Silver Hill Financial is a nationwide commercial real estate lender that offers financing to borrowers through a network of mortgage brokers and correspondents. The company’s innovative residential-style program makes commercial lending easy as residential, using flexible underwriting criteria ideal for borrowers seeking loans from $100,000 to $1.5 million. For more information on Silver Hill Financial, please visit www.silverhillfinancial.com/nextstep or call us at 888.988.8843
