Commercial Loans

CMBS Commercial Loans

CMBS loans can be used for the purchase or refinance for Commercial Real Estate properties, including Hotels, Industrial, Office, Multi-family, Medical, Mixed-Use, Retail, and Self-StorageLike all the other loans we offer at CLD, this type of loan is secured by a first-position mortgage on a commercial real estate property and is particularly popular among commercial real estate investors seeking non-recourse loans. Although conduit lenders have reverted back more prudent credit decisions that mitigate risk of default, CMBS loans have more flexible underwriting guidelines than conventional or agency loans. This means that Commercial Real Estate Investors that cannot meet the more stringent c...

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Conventional Commercial Loans

Commercial loans can take 2 different forms – owner-occupied mortgages and investment mortgages. When the collateral is owner-occupied, the property’s sponsor(s) use over 50% of the building’s useable square footage for their personal businesses. Any other use makes the collateral investment property. It is important to note that in order to securitize a commercial loan properly Commercial properties must be zoned appropriately. Conventional commercial loans are mortgages backed by commercial real estate that are provided by a lending institution such as banks, credit unions, savings and thrift institutions, life insurance companies, hedge funds, pension funds, private financial instit...

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Bridge Loans

Bridge financing gives owners the flexibility they need to reposition and stabilize commercial real estate properties. It is important to note that Bridge loans usually call for a clear exit strategy upon the loan’s term completion. Property types that fall under the Bridge Loan Program are as follows: apartments, industrial, medical, mixed use, office, retail, as well as self-storage. Max LTV can go up to 90%. Term length ranges from 12-36 months. Amortization is interest only, self-amortizing or a combination of the two. Debt Service Coverage Ratio requirements vary widely depending on the program and can usually range from sub 1 to 1. 6 times. Bridge loans are can be recourse and non-re...

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USDA Commercial Loans

USDA stands for United States Department of Agriculture. The USDA helps create jobs and stimulates rural economies by providing financial backing for rural businesses and properties. Its primary purpose is to create and maintain employment and improve the economic climate in rural communities. USDA Loan proceeds may be used for working capital, machinery, and equipment, real estate, and certain types of debt refinancing. This is achieved by expanding the lending capability of lenders in rural areas and helping them service quality loans that provide lasting community benefits. Properties that fall under USDA loans are as follows: apartments, hotels, industrial, medical, mixed use, office, re...

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Construction Commercial Loans

Commercial Loan Direct offers conventional construction loans for commercial real estate properties, SBA-504 companion mortgages for transactions that are approved via the Small Business Administration, and FHA loans for apartment complexes construction. Property types eligible for construction financing are as follows: industrial, medical, mixed use, multifamily, office, retail, as well as self-storage. LTVs can go up to 75% through a conventional program but sometimes can go a little higher by obtaining an exception, 90% Loan to cost can be achieved through HUD’s FHA program for multifamily construction, and 90% with the SBA 504 program for owner occupied properties. Term lengths usually...

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Freddie Mac Small Balance Program

The Small Balance Program is for the acquisition or refinance of small balance loans providing liquidity, stability, and certainty of execution to the affordable rental housing market nationwide. Key Benefits of the Freddie Mac Small Balance Program are as follows. Financing of small balance loans using hybrid ARM or fixed-rate mortgage products, offering partial-term and full-term interest-only, A Streamlined processes during pricing, underwriting, closing and funding as well as Competitive pricing and Streamlined loan documentsProperty types eligible are as follows:Conventional multifamily housing with five residential units or more, including conventional housing with tax abatements and S...

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CMBS Loan Application Process

Getting an Application If you are in agreement regarding the rate that was quoted to you by the CMBS Lender, the next step is for them to issue you an application. Typically, in order to be issued an application, the following additional items are needed: 3 years historical operating statements on the property Annual budget for the current year Copy of the franchise agreement and any proposed PIP (if hospitality) Purchase price (if purchase) Cost basis (i. e. purchase price + capital improvements) and loan balance (if refinance) Requested loan amount, including schedule of sources and uses Keep in mind that some of these items may be reviewed during the underwriting period rather than ...

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Risk Retention: Proposed Changes & Where Lenders Go From Here (Pt. 3)

Last year, some government officials began to realize the fallout that the original structure of the Securitization Safe Harbor Rule (i. e. risk retention) would have on the commercial real estate market. Because of that, some representatives started to look for a way to soften the original regulations while still protecting the public. On March 2nd of 2016, the House Financial Service Committee proposed an amendment called the Access to CRE Capital Act (meant to ease some of the original restrictions) that is supposed to be put up for consideration in the House and Senate this year. Let’s take a look at how this bill could change the current structure. This bill aims to enable more...

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How Risk Retention Affects Lenders, Borrowers, & Bond Investors (Pt. 2)

Since its inception, CMBS lending has been the go-to mortgage product for larger properties with sponsors that want non-recourse financing with high leverage, low interest rates, and lenient underwriting. However, since the market collapse in 2007 and the passage of the Dodd-Frank “Risk Retention”, things have changed. Although still more permissive than conventional or insurance products, CMBS underwriting standards have become more stringent, leverage points have been lowered, and interest rates can fluctuate greatly depending on treasury indexes and bond investor demands. Historically, one of the biggest benefits to being a CMBS lender is having the money that is loaned to the real e...

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What is Risk Retention under Dodd-Frank? (Pt. 1)

Anyone who works in or around commercial real estate has probably heard the words “risk retention” at some point, however many people may not fully understand what it is or how it may affect them personally. In order to understand what risk retention is, we have to take a look at where this term actually comes from. After the market collapsed in 2007, a lot of people lost A LOT of money, including retirees that got completely wiped out from what they were supposed to be living on for the rest of their lives. Needless to say, people were very upset, and demanded that the government do something to protect them from anything like this ever happening again. That’s where the Dodd-Frank W...

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How to Prepare a Financial Package for a Commercial Construction Loan

Keep in mind that each Lender has it’s own specific guidelines and that commercial construction loans take quite a bit of diligence before they are approved. This is only meant to be a general list of the items you should consider preparing in advance of contacting Lenders for an investment construction loan*:Project Executive Summary, including schedule of Sources & UsesStatus of entitlements and permits (regulatory letters, if available)Resumes for Architect, General ContractorAIA bid submission, if availableFeasibility/market studyMarketing planList of all Sponsors (including spouses) with at least 10% ownership in the propertyPersonal financial statement (PFS), including a schedule...

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What is a CMBS Loan?

A Commercial Mortgage-Backed Securities (CMBS or conduit) mortgage is a fixed-rate, non-recourse loan product that uses flexible underwriting standards and larger commercial real estate properties as collateral. Several of these mortgages are pooled together, securitized into bonds, and sold to investors. However, this doesn’t affect the borrower; the loan is serviced similarly to any other loan product. The financial institution that offers the loans to borrowers will initially fund the loans with its own money at closing, then pool the loans together and securitize them (i. e. turn them into bonds). The rating agencies (i. e. Moody’s, Fitch, Kroll, S&P, DBRS, and Morningstar) then ...

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