Commercial Loans Blog

Blanket Commercial Loans To Create a Downpayment

Posted by George Blackburne on Tue, Jun 30, 2015

Today's training article about blanket commercial loans contains an unusually important point that we will cover at the very end.  Be sure to stick with me until then.

The article is being written on marketing software created by a company called Hubspot.  Hubspot's marketing software was one of the best investments I've ever made.  The wonderful folks at Hubspot taught me how to capture the contact information of a huge percentage of the visitors to C-Loans.com.  My personal software coach, a lovely lady named Emily, taught me, "George, you have to give to get."  That's why our site gives away wonderful products - like a free list of 2,000 commercial lenders.  "You have to give to get."

Free List of 3,159 Commercial Lenders  Sort By Your Own Criteria

You and I probably first met when you clicked on a Call-To-Action button similar to the one shown below.

 

Free Directory of 750+  Commercial Real Estate Lenders

 

Anyway, one of the tools that Hubspot provides me is software that scans the internet every day and gives me a link to all of the news articles written nationwide about commercial loans or commercial real estate finance.  It's a great way for a rural guy to stay abreast of what all of the young hotshots are doing in New York City, Los Angeles, or Chicago.

 

Raining 

 

Yesterday an interesting article appeared in my CREF* news feed.  It was a tombstone released by a peer-to-peer commercial lending site announcing the close of a $6.75 million blanket commercial loan in Chicago.  *Commercial Real Estate Finance

What is a peer-to-peer lending site?  A peer-to-peer commercial lending site is one that bypasses the banking system.  By "peer" we mean the same kind of entity.  For example, if one private individual makes a loan to another private individual - some rich guy loans a young beer enthusiast $100,000 to start a brew pub - that's a peer-to-peer loan.  

Another example of a peer-to-peer loan is what happened in Chicago.  An investment fund LLC loaned this real estate development company $6.75 million to buy a class A office building in Chicago and to renovate it.  What makes this a peer-to-peer loan was that this investment fund is proably not in the business of making commercial real estate loans full-time.  This $6.75 million loan was probably just an investment for them.  Now if this investment fund was a mortgage investment fund run by a hard money lender, then this loan really wouldn't be a peer-to-peer loan.  That mortgage fund is a "professional lender", rather than a casual investor.

"Okay, George, I sort of get it.  But what's the difference between a peer-to-peer lending site and a crowdfunding site?"

A crowdfunding site is a lending site that syndicates groups of investors to make a loan.  Its not just one rich guy making the loan, but rather its a group of smaller investors pooling their money to make the loan.  This structure has the advantage of allowing an investor with just $20,000 to diversify his dough out among a dozen different loans.  A crowdfunding site is not just a source of loans.  Start-ups can also find equity investors to put up dough for a piece of the ownership.

Thought For the Day:  If a man empties his purse into his head, no one can take it away from him. An investment in knowledge always pays the best interest.

 

 Commercial mortgage training

 

Okay, now its time to finally talk about blanket commercial loans to create a downpayment.  Do you remember that $6.75 million office building purchase in Chicago?  Well, the buyer didn't put any money down!  No, instead he pledged as additional collateral a $3 million home in New York City that he owned free-and-clear.  The peer-to-peer lending site made a blanket commercial loan against both properties - the beautiful office building in Chicago and the free-and-clear home in New York City.  Its combined loan-to-value ratio against both properties was less than 58%.  It was a great deal for the lender and a very acceptable deal for the buyer, who already had a prospective tenant for the office building signed up.  You may have noticed that I said "acceptable deal" for the buyer, rather than "great deal".  I am sure the loan was far more expensive than a bank loan.

My own private money commercial lending company, Blackburne & Sons, is making a similar blanket commercial loan to create a downpayment this month.  Our borrowerr has the chance to buy a nice 24-unit apartment building in Massachussets, but he lacks a downpayment.  He owns, however, a four-plex and a duplex free and clear.  We are therefore blanketing all three properties to make a $590,000 new blanket first mortgage to allow him to acquire the apartment building.  Our combined LTV on all three properties is 65%.  Its a good deal.

 

Apply For a Commercial Loan to Blackburne & Sons

 

Now for the point of today's article.  You have seen how savvy commercial loan brokers get purchase money deal funded - they have their buyers put up additional collateral.

But here's the thing:  Banks seldom (almost never) make blanket commercial loans.  Wall Street lenders - like conduit lenders and nonprime commercial lenders - never make blanket commercial loans.  If you need a blanket commercial loan, you need to apply to a private money (hard money) commercial lender.

Got a buddy who makes commercial loans for a bank or a credit union?  (Deposits must be Federally-insured.)  Wanna make some dough?  Please click on the red button below and forward the page to him.  If he joins C-Loans, we'll give you a free training course of your choice, plus $250 every time he closes a loan for C-Loans.

 

Get Paid To Bring  Us Bankers

 

 

Topics: Blanket commercial loans

Subprime Commercial Loans Versus Nonprime Commercial Loans

Posted by George Blackburne on Wed, Jun 17, 2015

What is the difference between a subprime commercial loan and and a nonprime commercial loan?

The expression "subprime commercial loan" was a term advanced by Bayview Financial, and its subsidiary InterBay Funding, to describe a certain quality of commercial loan made in the early 2000's (1999-2007) that was destined to be added to Asset-Backed Securities (ABS) pools and eventually securitized.  We discussed ABS pools in my last blog post, Where Does Subprime Commercial Loan Money Come From?

 

Love_Life

 

Subprime commercial loans were pretty good loans.  They were the commercial real estate loans that were just not quite good enough for the banks.  Their characteristics were:

  1. They were first mortgage loans.

  2. They were secured by standing commercial properties; i.e., subprime commercial lenders did not make constructions or renovation loans.

  3. Subprime commercial lenders would accept most commercial property types, including multifamily properties, office buildings, retail buildings, strip centers and shopping centers, industrial buildings, mixed use properties, auto repair, hotels and motels, restaurants and bars, and self storage.  They would not finance churches and nudie bars.

  4. Deals were qualified primarily by loan-to-value ratio and a minimum credit score.

  5. Within a small range, the higher the credit score, the higher the loan-to-value ratio that subprime commercial lenders would go.

  6. Most subprime commercial loans were stated asset loans; i.e., the borrower's signed financial statement was accepted at face value.  The borrower did not have to prove how much money he had in the bank.

  7. Most subprime commercial loans were stated income loans; i.e., the borrower's income, as stated on a signed financial statement, was accepted at face value and did not have to be supported by  tax returns.  In fact, tax returns were rarely even collected.

  8. Full occupancy was not required.

  9. Lease estoppels were not obtained.  A lease estoppel is a document, signed by the tenant, confirming what he owed in rent.  By signing, the tenant was estopped (fancy legal word meaning he is stopped from denying) from claiming he had prepaid his rent or that his rent obligation was somehow lower.  (Note to self:  Estoppels would make a great blog subject.)

  10. Impounds for leasing commissions and tenant improvements were not required.  This is surprisingly important because CMBS lenders require such impounds on conduit loans.

 

BS

 

 

Free List of 3,159 Commercial Lenders  Sort By Your Own Criteria

 

It is important for you to understand that subprime commercial loans are gone for good.  Even though these subprime commercial loans performed reasonably well during the Great Recession, subprime residential loans proved to be such a disaster that they have forever poisoned the well for subprime investors.  The word, "subprime", is now a very dirty word.

"But George, I get emails all of the time saying that 'Subprime Commercial Loans Are Back.'"  It's nonsense.  These emails are simply from hard money lenders wishing to make their commercial loans at hard money rates and terms.

The wonderful thing about the subprime commercial loans of the early 2000's was that they were offered at interest rates that were a whopping 3% to 4% cheaper than the best rate that any hard money lender could offer you.  Unfortunately those days and those loans are indeed gone forever.

"Okay, George, so what is a nonprime commercial loan?"

I have now mentioned several times that subprime commercial loans performed pretty darned well during the Great Recession.  The boys on Wall Street are not idiots.  They took notice of the surprising performance of these older subprime commercial loans during the slump, and the situation screams to bring them back.

But the Wall Street Boys have a packaging problem.  It's that dirty word, "Subprime."  Yuck!  Wash my mouth out with soap.  But what if they gave these same loans a different name?  How about "Nonprime"?

Okay, we're on the right track; but we have to make a few substantive changes - something real.  Otherwise investors will see through the charade.  One of the big criticisms of subprime residential loans was that they were liar loans.  The borrowers didn't make near the amount of money they represented on their loan applications, and not surprisingly, a ton of these loans went bad.  Okay, so we'll document these new nonprime loans better.  That will be the substantive difference.

Now we are finally ready to describe the characteristics of a nonprime commercial loan:

  1. As a general rule, nonprime commercial loans are the same kind of deals as subprime commercial loans.  They are pretty good commercial loans that are just not quite good enough for a bank or a conduit.

  2. Stated income loans are a thing of the past.  Tax returns and leases are required.

  3. Most commercial real estate loans loans are arguably stated asset loans.  Surprisingly, even though commercial real estate loans are usually much, much larger than home loans, most banks and most other commercial lenders do not require the borrower to verify his bank deposits and stock holdings.*  This is also true of these new nonprime loans.  *No verifications of deposit are required for $2 million commercial loans, but if the borrower wants to borrow just $100,000 to buy a home, he has to verify every piece of lint in his belly button.  Ha-ha!  Weird but true.

  4.  Because of all of the documentation requirements, most nonprime commercial lenders only want to do larger loans - the deals over $750,000.  In the old days, InterBay Funding would do subprime commercial loans as small as $100,000.

  5. Because the loan amounts are still much smaller than conduit loans (minimum of $5 million), I do not believe that impounds are required for leasing commissions and tenant improvements.  (Anybody out there know for sure?)

For more on subprime and nonprime commercial loans, please click here.

Six new nonprime commercial lenders have joined C-Loans in the past 18 months.  You can submit your four-minute mini-app to all six of them with one click.  And remember, your use of C-Loans is free!

 

Apply To Six Nonprime  Commercial Lenders

 

If you appreciate my simple way of teaching, I would ask you to do one thing for me and one thing for yourself.  When you guys share my blog articles on Facebook, Google Plus, Twitter, or LinkedIn, it means the world to me.  Thank you.

And for yourself, invest a lousy $549 in your professional education and order my famous 9-hour video training course, How To Broker Commercial Loans.  It teaches you how to market for commercial loans, how to underwrite them, how to package them, where to place them, and most importantly, how to collect your fee (fee agreement included).

 

Commercial mortgage training

 

Remember, if you run across a banker who makes commercial real estate loans, be sure to grab his business card.  You can parlay the contents of this business card into a free directory of over 2,000 commercial real estate lenders.

 

Free Directory of 750+  Commercial Real Estate Lenders

 

So you meet a banker who makes commercial real estate loans.  "Hey, Mr. Banker, do you want to make a few more commercial real estate loans?  You do?  I have just the contact for you."  Then you forward him the web page that appears if you hit the red button below.  If he joins C-Loans, you'll get a free training course of your choice, plus $250 every time he closes a commercial loan for us.

 

Get Paid To Bring  Us Bankers

 

 I had a lender this month "delay" in paying me a $31,500 closing fee.  Because I have completed more fee collection actions than anyone in the industry, I was able to encourage him to pay me in full without any bloodshed.  Guys and ladies, you need to learn this!  This fee agreement and fee collection course are included in the complete nine-hour course described above, but if you can't afford $549, you can buy just the fee collection portion of the course for $199.

 

Fee Agreement and Fee Collection Course. Just $199.

 

My private money commercial mortgage company is starving for small commercial permanent loans.  Remember, we'll issue you a Loan Approval Letter with 24 to 48 hours for free.  You can then show this Loan Approval Letter to your bankers.  Just like girls are attracted to boys with a pretty girl on their arm, bankers are attracted to (porch lights and) commercial loans that other lenders have already approved.

 

Apply For a Commercial Loan to Blackburne & Sons

Topics: Subprime Versus Nonprime

Where Does Subprime Commercial Loan Money Come From?

Posted by George Blackburne on Tue, Jun 16, 2015

Subprime_RacoonFor over thirty years, the only commercial real estate lenders making subprime commercial loans were hard money commercial lenders.  Either a bank funded your commercial real estate loan or a hard money lender funded it.  No one else was making subprime commercial loans.

Then some smart Wall Street investment bankers started to covet the outrageous returns being enjoyed by those private investors who invested in hard money commercial loans.  There is an old saying in capitalism, "Outrageous profits breeds competition."  Many private investors who invested in subprime commercial loans - even after loan lossess - were indeed earning outrageous yields, typically 6% to 8% more than what C.D.'s were yielding.

The first major Wall Street player into the subprime commercial loan business was Bayview Financial L.P., along with their small commercial loan subsidiary, InterBay Funding, LLC.  Bayview and InterBay entered the subprime commercial loan market in 1999.  By the end of 2006, they were the dominant players in the business of securitizing subprime commercial real estate loans.  Another large player in the subprime commercial loan business at the time, although considerably smaller, was Lehman Brothers.

At the time, the securitization business was going wild.  Investment bankers were already securitizing jumbo home loans, car loans, and credit card debt.  It was Bayview Financial that first convinced the investment world to also accept subprime commercial loans into their loan pools.

Bayview Financial accomplished this important feat by gradually sprinkling a few subprime commercial loans into their asset-backed securization pools.  You have no doubt heard of the term mortgage-backed securities; but asset-backed securities are slightly different than mortgage-backed securities.

 

Free List of 3,159 Commercial Lenders  Sort By Your Own Criteria

 

Asset-backed securities ("ABS's") are defined as bonds backed by pools of various kinds of loans, not just mortgages.  In the early 2000's, the typical asset-backed securitization pool consisted of credit card paper, car loans, aircraft leases, royalty payments, and scratch-and-dent residential loans, which are home loans that have been kicked out of mortgage pools.

Bayview Financial convinced some Wall Street investment bankers to allow them to sprinkle into these asset-backed securitization pools a few subprime commercial loans.  This had several advantages for the pool.  First of all, the typical scratch-and-dent residential loan was 80% loan-to-value.  The typical subprime commercial loan was just 65% loan-to-value.  By sprinkling in a few subprime commercial loans, the pool's average loan-to-value ratio declined from 80% to 72% LTV or so.

The average yield on a subprime commercial loan was also around 2.5% higher than the average scratch-and-dent residential loan.   Sprinkling in a few subprime commercial loans raised the average mortgage yield in the pool.

The concept proved to be a sound one.  These subprime commercial loans also ended up having a better payment record than the residential loans in the ABS pools. Soon Wall Street had a steady appetite for subprime commercial loans, and Bayview had created a new industry.  For several years the ABS industry was cookin' with gas.

Then the Great Recession hit.  Subprime residential loans defaulted in enormous numbers, and soon the word "subprime" became a dirty word.  The ABS market dried up entirely, Lehman Brothers went bankrupt, and Bayview Financial was forced out of the market.  The entire Wall Street subprime commercial loan industry disappeared overnight.

 

Homeless

 

For eight years a handful of surviving hard money commercial lenders feasted on a niche where we had very little competition.  It was a particularly good time because the banks had largely stopped making commercial loans.  Therefore not only was the Wall Street subprime commercial loan business gone, but the banks were not making many commercial real estate loans either.  Those were the days, my friend.

In my last blog article, I mentioned that while commercial real estate fell by 45% during the Great Recession, it did NOT fall because so many subprime commercial loans went bad.  In fact, the overwhelming majority of these Wall Street subprime commercial loans paid a fine rate of interest through the Great Recession.

 

Egg_Nog

 

By the way, I call them "Wall Street" subprime commercial loans because it is the investment banking industry that sells the bonds backed by these subprime commercial loans.  Bayview, InterBay, Lehman Brothers, and other mortgage companies may have originated these loans, but it is the Wall Street investment bankers who ultimately sell these asset-backed bonds.

Okay, so the economy eventually recovered.  The surprisingly positive performance of these subprime commercial loans through the slump was noticed by the investment world.  Capitalism functions, and now the Wall Street subprime commercial lenders are back.

But there is a twist.  No longer do bond investors just want a few subprime commercial loans sprinkled on top.  Now they want the entire ice cream cone filled with subprime commercial loans.  In other words, the entire pool of loans will be subprime commercial loans.  These pools will be securitized as if they were they were small, higher-yielding CMBS pools.

These new commercial loans are called nonprime commercial loans.  I hope to blog later this week about the difference between a subprime commercial loan and a nonprime commercial loan.

For more on subprime and nonprime commercial loans, please click here.

At least six nonprime commercial loan companies have sprung up or returned to the market in the past 18 months.  Blessedly they have all joined C-Loans.com as lenders.  You can apply to all six nonprime commercial lenders by submitting your deal through C-Loans.

 

Apply To Six Nonprime  Commercial Lenders

 

One of the nice things about taking my famous 9-hour video course, How To Broker Commercial Loans, is that you learn the entire profession.  You'll even earn how to underwrite commercial construction loans.  You will finally understand what in 'tarnation lenders mean when they throw around terms like mezzanine loans, preferred equity, and structured finance.  Your confidence will soar.  No longer will you be just winging it.


 
 

Commercial mortgage training

 

Remember, if you run across a banker who makes commercial real estate loans, be sure to grab one of his business cards.  You can parlay the contents of just one business card into a free directory of over 2,000 commercial real estate lenders.

 

Free Directory of 750+  Commercial Real Estate Lenders

 

How would you like to get that wonderful 9-hour video course for free?  Just convince one of your banker buddies to join C-Loans.com as a lender.  You'll also receive $250 every time he closes a commercial loan for C-Loans.  Is it hard to convince a banker to join?  Naw.  Just click on the red button below and forward the page to your banker.  The page sells itself.

 

Get Paid To Bring  Us Bankers

 

C-Loans now offers business loans, rather than just commercial real estate loans.  This includes accounts receivable financing, equipment financing, inventory financing, and secured lines of credit.

 

Business Loans Not Secured By   Real Estate - Unsecured or Secured 

 

My own hard money shop is ravenous for subprime commercial loans.

 

Apply For a Commercial Loan to Blackburne & Sons  

 

 

Topics: Source of Subprime

The Subprime Commercial Lenders Are Back Making Nonprime Commercial Loans

Posted by George Blackburne on Thu, Jun 11, 2015

Commercial loans were soooo easy to find after the Great Recession.  It was like shooting ducks in a barrel.  Banks had stopped making commercial real estate loans, and many were even offering their existing borrowers a huge discount to pay their commercial loans off early.  These were called discounted pay-offs (DPO's), and my private money commercial mortgage company, Blackburne & Sons, must have financed sixty DPO's in the last three years.  Man, do I ever miss those days.

 

Goose

 

But like a forest mending itself after a fire, the commercial mortgage market is returning to health.  A-quality commercial mortgage requests are once again getting financed by banks, rather than by private money (hard money) lenders.

Free List of 3,159 Commercial Lenders  Sort By Your Own Criteria

Wall Street subprime lenders have even returned to the market.  Most have joined C-Loans.com, and you can find them by inputting your commercial loans - not into one of our gray buttons - but rather into the six-part (but still immensely easy) automated and free commercial loan submission system found at the top of our home page.

 

Submit Your Loan to 750 CommercialLender

 

The return of Wall Street subprime commercial loans - now called nonprime commercial loans - doesn't surprise me.  I always thought that the subprime commercial loans made in 2004, 2005, and 2006 were perfectly fine loans.  Sure, commercial real estate fell by 45% during the Great Recession, but not because a ton of Wall Street subprime commercial loans defaulted.  I don't know the actual numbers, but I would be surprised if more than 15% to 18% of these loans eventually came back in foreclosure.

Commercial real estate fell because commercial property investors were frightened.  The economy contracted.  GDP fell.  There was a genuine panic that a deflationary vortex would start - a cycle where companies started to fail because demand was weak, which would lead to more layoff's, which would lead to even weaker demand, which would cause even more companies to fail, which would leads to even more layoff's...

 

Nippy

 

But commercial real estate did NOT fall 45% because a ton of Wall Street subprime commercial loans went bad.  The vast majority of these loans were good loans, loans that Blackburne & Sons would have loved to have in its portfolio.

So Wall Street is now back and poaching in my fishing pond.  It's largely the same product - commercial real estate loans that are just barely too flawed for a bank.  Only the name has changed.  These loans are no longer called subprime commercial loans.  They are called nonprime commercial loans.

Just remember:  You can find them almost all of these prodigal Wall Street nonprime commercial lenders on C-Loans.com.

Commercial Mortgage Bankers:  You should be calling on commercial real estate loan officers at your nearby commercial banks asking for their turndowns.  Remember, the typical commercial loan officer turns down seven or eight commercial loan applications for every one that he approves.  If you meet a banker who makes commercial loans, be sure to trade the contents of his business card for a free directory of 2,000+ commercial real estate lenders.

 

Free Directory of 750+  Commercial Real Estate Lenders

 

Because of all of the ballooning commercial loans, the next three years promises to be the most profitable time in the history of commercial real estate finance.  It is a great time to be a commercial mortgage broker.  It's time that you actually learned the profession, as opposed to just winging it.

 

Commercial mortgage training

 

How would you like to get the above $549 video training course for free?  Got a banker buddy who makes commercial loans?  Just click on the red button below and forward the page to him.  If he joins C-Loans, you'll earn a free training course of your choice (you may want to become a hard money lender yourself), plus $250 every time he closes a deal for us.

 

Get Paid To Bring  Us Bankers

 

The wise commercial mortgage banker submits every commercial loan request to Blackburne & Sons, even if he also submits it to a few banks.  At no cost, we'll issue a Loan Approval Letter.  You can then show that approval to your banker.  "You can beat this, right Mr. Banker?"  Just like girls are attracted to boys with a pretty girl on their arm, bankers are attracted to commercial loans that other lenders have approved.  So give us a chance to issue an approval for your borrower.  Then, if your banker suddenly leaves you standing there at the altar looking stupid (that never happens, right), you and your borrower can always fall back on Blackburne & Sons.

 

Apply For a Commercial Loan to Blackburne & Sons  

Topics: Subprime Commercial Loans