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The 4 C’s of Commercial Mortgage Lending: Character

Commercial Mortgage
Posted on 
November 12, 2015

The character of your borrower may be the most intangible factor to consider when working to get them a commercial mortgage loan. If you’re a commercial mortgage broker who works with non-bankable borrowers, this is particularly important, especially if you work with story lenders.  These lenders are willing to work with borrowers who have had issues in the past, but they need to know the nature of these borrowers. Here’s how you can establish the character of your borrowers:

Ask the right questions.

It’s important for you to know the kind of questions to ask to help determine the character of your borrower. As a commercial mortgage broker, it’s your job to look over their credit report and application, read between the lines and ask the questions that will allow you and your lender to make a decision regarding this commercial mortgage request.

What happened?

First, you need to discuss with your borrower why they are non-bankable. What obstacles did they face that ended in a bank turn-down? Make sure to include all of this in a credit explanation.

How did they resolve the situation?

Once you’ve determined how their problems started, you need to discuss how your borrower resolved those problems. For example, did your borrower sell their home in order to keep their business going during tough times? This is information that your lender will take into account when making a decision.

What kind of debt do they have?

Certain types of debt raise a red flag for lenders. If your borrower was late on their mortgage payments, child support payments or payroll taxes, that tells the lender a lot about the character of a borrower.

Do an Internet search.

Before submitting a loan scenario to your commercial mortgage lender, do a quick Internet search on your borrower. There are times when borrowers will omit certain facts of their past because they’re worried they’ll be turned down again. They might be right, but it’s best to know that early on so that you won’t waste your lender’s time, your borrower’s time or your own time.

Encourage your borrower to be honest.

One of the things that can slow down the lending process is problematic information surfacing during underwriting or processing. Story lenders can help non-bankable borrowers, but you need to encourage these borrowers to be as up front about any past issues as possible.

When it comes to character, it generally comes down to honesty and openness. While there are some past issues that will disqualify borrowers, non-conforming commercial lenders can help many non-bankable borrowers. Make sure that you take the time to get to know your borrower and their situation and encourage them to be honest about their past debt. This will go a long way towards establishing their credibility and getting the loan closed.

Other blogs in this series include Credit, Collateral and Capacity to Pay.


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