Commercial Loans and Fun Blog

Cosmic Pillow Theory of Commercial Loans

Posted by George Blackburne on Tue, Mar 23, 2021

huge pillowWe have all heard the old saying, "The harder I work, the luckier I get."  This is especially true during tax time in the commercial loan business, from mid-March to late April.  Commercial loan demand is almost non-existent.  Here is a reminder why.

If you blast out newsletters during tax time, your results are going to be crumby... but you will still somehow find a few deals.  


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The deal that lands on your plate will apparently have nothing to do with with your newsletter or your social media post.  The borrower will have never met nor spoken with any of the recipients of your newsletters, nor with any of your social media subscribers.  Nevertheless this borrower will somehow find you.

It all boils down to the size of cosmic pillow.  WTFudge, George, this sounds stupid.  Just watch.  You scoff now, but fifteen years from now you will will be sharing the Cosmic Pillow Theory with your own staff and kids.  [Chuckle]

The Cosmic Pillow Theory suggests that the cosmos is like one giant feather pillow.  This pillow is stuffed to the gills with feathers, and if you try to stuff even one more little feather into that pillow, a different feather is going to pop out of a bursting seam somewhere else on that pillow.  The cosmos just can't handle even one more feather.


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So when you market (newsletters, social media posts, trade shows, etc.), you are trying to stuff one more feather into that cosmic pillow.  The feather from your marketing will appear to squeeze into the pillow, but somewhere else, along a bursting seam in a far corner, an unrelated feather - a lead- will be squeezed out.

This explains why if you send out a newsletter to your Oregon commercial real estate investors how you will somehow stumble across a sweet, do-able New Mexico strip center loan.  Remember, this borrower doesn't know a soul in Oregon; yet somehow he will find you.

Folks, I am not making this stuff up.  I share with you my experiences over my forty-four years in the commercial loan business.  This bizarre reality has happened to me sooo many times during tax season that I actually had to invent the silly Cosmic Pillow Theory.  A theory is only theory if it actually has been proven - if it actually works.  Folks, the Cosmic Pillow Theory is no mere hypothesis.  It works.  


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So here's my lesson:  Don't stop advertising and marketing during tax time.  Yes, your results will be crumby, but you will still pick up a few commercial loan requests.

Now the Wonderful News:

if you bring a commercial loan to a bank in the next few months, that bank is going to jump all over the deal.  The bank has virtually no other commercial loan demand, so the bank is effectively wearing beer goggles.  Hahahaha!  Your deal will suddenly look like a supermodel.

More Good News:

When interest rates on commercial loans start going up, borrowers get motivated to borrow now, rather than six months from now.  


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The worst two years of my career were between 1981 and 1982, when Fed Chairman Volker broker broke the back of inflation.  The prime rate fell every month for fifteen straight months.  Talk about an excuse to procrastinate!  Absolutely no one was looking for a commercial loan.


Are you religiously saving the contact information and the loan data on every single wealthy real estate investor with whom you speak?  This even applies to wealthy real estate investors to whom you merely quote a commercial loan!

Dear Dr. Nguyen:

You may recall that in October of 2020 we had the pleasure of working on a $2,300,000 first mortgage on your shopping center in Kansas City, Missouri.  Today I am writing you about earning 10% interest in first mortgages.


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Oh, nooo!



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In truth, you merely spoke to Dr. Nguyen for about three minutes... but you saved his data, you clever lady.

Brutal Truth:

The money in commercial real estate finance ("CREF") is in loan servicing fees.  If you are not working towards building your own loan servicing portfolio, you should get the heck out of the commercial mortgage business!  

"Ouch.  That was rude, George."  Folks, the typical commercial mortgage banker earns six to ten times more than the typical commercial mortgage broker.  Heavens, imagine the freedom of being Loan Committee!


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Mortgage bankers service their own loans and earn loan servicing fees.  These loan servicing fees carry them through the real estate depressions that hit every ten to fourteen years.  (It's been 13 years since the crash of 2008.)  The easiest way to build a loan servicing portfolio is to become a hard money lender.  

"Oh, my goodness, George!  I have no ideas how to service loans."

Quit being a weenie.  Just hire a sub-servicer to service your first forty loans.  With computers, servicing commercial loans is easy - as long as they don't default.


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Topics: servicing hard money loans, servicing loans