Mortgage Broker Value
Not surprisingly, borrowers often default to their own Banker. And why not? It’s
an established and comfortable relationship. Perhaps it’s viewed as the path of
least resistance. But is it the right lender for the borrower’s current specific
needs? Perhaps not.
More sophisticated borrowers may be of a size or scale that they have their own
internal resources in finance, quite capable of securing the required financing.
They are likely only in the market infrequently however, and almost certainly
not fully knowledgeable as to all of the financing sources available.
Aren’t all Lenders pretty much the same?
Borrower’s may think that all institutional lenders are pretty much the same.
Offering comparable rates, and standardized borrowing terms. This is rarely the
case. Lender’s often prefer one asset class over another. They may have a
particular need for one type of loan. A specific length of loan term may be
desirable, for funds matching purposes. Real Estate risk is a fact for real
estate lenders. How they mitigate this risk differs however. It may be stress
testing interest rates during the approval process. Sophisticated risk pricing
models may be used, having regard to previous loss experiences. The lender may
rely significantly on collateral value, or guarantees. The conditions precedent
to funding will often differ from lender to lender.
A real world example
I had the pleasure last year in advising a client who had 3 sizable real estate
assets, in 3 quite distinct asset classes. The borrower’s loan amount
requirements were significant, however they were flexible on loan structure.
Accordingly, I sought out competitive, but differing deal structures. My goal
was to provide a competitive array of options. A number of “A” class lenders
were approached, several/most of whom this particular borrower had no previous
experience with. I shortened the list to 5 lenders, and received Term Sheets
from each.
Each Offer was competitive on a stand alone basis, but they differed quite
substantially, in the following ways:
Loans were either stand alone, or blanket loans, or some combination.
Length of terms offered, differed by asset class.
There was as much as a 75 bps rate difference, from highest to lowest Offer.
The amortization period depending upon asset class, ranged from 15 to 25
years.
Loan amounts on individual assets differed as much as 20%.
Third party reporting requirements differed between lenders.
There were a combination of fixed vs. floating rate loan structures.
Recourse was limited by some lenders, on select assets, or waived entirely,
upon a higher rate structure.
Leverage Your Knowledge
These variances are striking, yet each of the 5 lenders were considering the
precise same asset, at the same time, with common supporting information from
which to base their analysis. How was the borrower to know which Offer to
exercise? As a Broker, I can add value by helping the borrower to consider both
their immediate and longer term strategic requirements, in the context of their
overall real estate portfolio needs. This was precisely how this borrower landed
on the most appropriate Offer for their particular circumstances. In this
particular case we presented different, yet competitive, and uniquely structured
options for the borrower’s consideration.
Consider Shoren Konstantin – Mortgage Broker when next in the market for
financing. Leveraging a Broker’s knowledge is a tremendous value proposition.
