In regards to Greg’s inquiry about the sweetest mobile home park product I have… MFG Advantage (Multifamily Group Advantage)
This is an apartment product for mobile home parks! The difference… 10bps (.10%) in rate!
If you are looking for a program with minimal borrower requirements, this is it! 90% of the weight of qualification is based on property factors. 10% is based on borrower factors. This is straight from the risk model our underwriters utilize!
680 + FICO (Possible Exceptions)
No Net Worth, Personal Debt to Income, Liquidity to Loan ratios calculated!
3 Months of Principle and Interest Payments in Liquid Account Required (401 K, Stocks, Bonds, Savings, Line of Credit, etc.)
*3, 5, 7, 10 year fixed rate (no balloon)
*30 year amortization
*30 year term
*85% Purchase, 80% Cash-Out or Rate/Term Refinance
*after initial fixed period adjusts to 6 month LIBOR + 2.500%
*Prepayment Penalty goes away by last year of fixed period (10 year fixed has 8 year prepayment penalty, 3 year fixed has 2 year prepayment penalty)
For a $1,000,000 loan at 80% LTV, today 12-28-06, with an average borrower of 680 FICO looking to purchase… I could get them on our Advantage program for 10 years at 6.72% with costs of $5,500 + 1%. Can get 7.02% fixed for 10 years with costs of $5,500 + 0%.
****NOTE: the term “stated” can be very misleading to someone coming from a residential background into the commercial arena (yes mobile home parks require a commercial loan, though multifamily has its own special commercial category). Stated in residential means that a borrower states the income they make instead of “proving it” as they say. This affects the risk of repayment and in now way affects the collateral (the house value isn’t any higher because borrower stated their income higher than it actually was). In residential the borrower is the only factor in repayment.
In commercial if you were to “state” the income of the property (in commercial, income properties pay for themselves in terms of expenses and repayment of loans), it would affect the collateral in addition the risk of repayment. This is because the income a property produces affects its value directly in commercial.
Wasn’t quite sure of Greg’s meaning, but I felt it was worth clarifying because I actually had a broker call me yesterday and we had the following conversation…
Broker: “Do you collect leases?”
LO: “Yes we do. After we pre-approve the property we collect leases as a verification of the information already submitted and analyzed.”
Broker: “Will an appraiser collect leases?”
LO: “Yes, an appraiser will see all the numbers we provide them. Is there something about the leases I should know?”
Broker: “Oh no, but if we went with a “stated” program can’t we state the rents as higher than they are actually? Rents are a bit below market.”
LO: “No. I’m afraid that’s not what we mean by “stated” in commercial. Really though, you don’t need to state the income of the property, you need to find a lender willing to utilize a lower debt-service-coverage ratio in proposing a loan dollar. Would you like to know the difference in how an appraiser will look at this compared to a lender on a below market rents program?”
Broker: “Oh well, no thanks. I need a real stated program…”
The broker was so stuck in his residential mind-set he had already decided that he needed a program where he could state the income of the property before he contacted one lender. There are options for these types of properties, but having a professional with experience who can assist you becomes invaluable to a broker or an investor.
Commercial is a very strange animal as you emerge from the jungles of residential lending. I find commercial a breath of fresh air sometimes compared with residential (Don’t get me wrong I love doing home loans). The reason this is so is that residential is a commodity business. Commercial has seemed to edge that direction over the past 6 years, but it’s still a long way off. I see commercial as a services and relationship business. In residential the loan goes to the lowest bidder (usually). In commercial I have snagged the best deals from the competition by having an unmatched relationship with the bank that funds our deals (we are a correspondent lender). Below are highlight examples from 2006.
*Exception for 8 borrower deal where 3 guarantors were at credit scores of 636-658 (Required 680 typically). Same deal, got exception for approving a 90% loan. Our bank’s first deal to ever have 90% financing secured on a single property!
*Piloted the first 80% interest only product this year for our bank. It is now commonly available for borrowers with 700+FICOs.
*Exception on cash-out refinance seasoning. Borrower was short $40,000 to pay for construction work to add pads to his park (when he met me he had already begun construction and was in a bad spot). He needed more money than we typically allowed, but since he did such a great job of turning the park around in such a short time (it was partial rehab partial construction project) I prepared a proposal that my bank loved as much as the borrower did! The borrower got money to pay off the people providing the construction.
Commercial isn’t quite as “cookie-cutter” as residential.