Quotation Date

Detailed Description

The Quotation Date is a critical temporal marker because commercial mortgage rates are rarely static. Unlike residential mortgages, which may have daily posted rates, commercial loan pricing is often custom-tailored and highly sensitive to fluctuating market indices. Here is a detailed breakdown of how the Quotation Date functions within a transaction:

• Benchmark Alignment: On the Quotation Date, the lender identifies the current value of a specific financial benchmark, such as the Secured Overnight Financing Rate (SOFR) or various U.S. Treasury yields (e.g., the 5-year or 10-year Treasury). The total interest rate offered to the borrower is typically calculated as the sum of this benchmark plus a predetermined "spread" (the lender's profit margin and risk premium).
• Validity Period: A quote provided on a specific date is usually only valid for a very short window—often 24 to 48 hours. Because bond markets move constantly, the lender will specify that the terms expire if the borrower does not sign the term sheet or pay a processing fee by a certain time following the Quotation Date.
• Rate Locking: It is important to distinguish the Quotation Date from the Rate Lock Date. While the Quotation Date establishes what the lender is willing to offer today, the final interest rate is not usually guaranteed (locked) until a later stage in the underwriting process, unless a formal rate lock agreement is executed.
• Impact of Market Volatility: If there is significant market volatility between the Quotation Date and the loan closing, the lender may be required to issue a "Re-Quote." In such cases, the original Quotation Date becomes obsolete, and a new date is established to reflect updated benchmark yields.
• Documentation: The Quotation Date is explicitly stated on term sheets and letters of intent (LOI). This provides a paper trail for both the borrower and the lender to track how pricing has evolved from the initial inquiry through to the final commitment.

Ultimately, the Quotation Date acts as the starting point for financial negotiations. It allows the borrower to perform debt service coverage ratio (DSCR) calculations and determine the feasibility of the commercial investment based on the costs of capital at that specific moment in time.