There are plenty of things for brokers to consider when choosing commercial mortgage lenders to work with. What kind of rates do they offer? What are their terms like? Are there upfront fees? These are all important questions, but there’s another that you should also be asking lenders: Do you securitize and sell off your loans or not? Those who don’t sell, known as portfolio lenders, afford brokers benefits when it comes to selling small-balance commercial mortgages to borrowers.
Here are some pros of working with a commercial mortgage lender that portfolios their loans:
They’re direct lenders.
To understand the benefit of a direct lender, you need to understand securitization. Securitizing is when a lender converts an asset (most often a mortgage) into marketable securities, generally to raise cash by selling them to investors. Lenders who do this are subject to more restrictions because their ability to finance commercial mortgages is directly tied to the investors who provide the funds for these loans. Because of this, these lenders need to make sure they close loans that are attractive to investors. Portfolio lenders don’t have these types of concerns because they have a consistent source of funding and they service mortgages through the life of the loan.
They’re more flexible.
Because portfolio lenders service the mortgages they provide through the life of the loan, they have the ability to be more flexible when it comes to the type of deals they’ll fund. They don’t need to worry about keeping an investor happy or the ability to sell off their loans, so mortgage requests don’t need to fit the strict parameters that investors deem profitable. It also means that negotiating a rate and terms tends to be easier since a portfolio lender sets their own guidelines and will be willing to listen to your borrowers’ stories.
Your borrower receives consistent customer service.
As a broker, you’ll only be involved with a commercial mortgage scenario until the deal closes. However, it’s important to consider what your borrower will experience once the closing documents are signed. With a portfolio lender, your borrower will always know who they’re dealing with and can expect consistent customer service throughout the life of the loan. This means more happy borrowers, which could lead to return business for you, as well as recommendations to other small business owners looking for a commercial mortgage.
It’s important for brokers to work with a variety of lenders, as both portfolio lenders and lenders who securitize can be great options depending on the borrower. This variety allows you to provide the best possible experience and mortgage to each of your clients. For some of your borrowers, a portfolio lender’s direct funds, flexible underwriting and consistent customer service will be the right choice, so it’s important to build partnerships with them.