‘DECLINED’…few words in the English language create anxiety more than that one. It can be a college entrance application, a new car loan or a mortgage, it’s simply not fun to hear that word. It brings up all sorts of questions, ‘…was it my late library book in 2019, that new computer purchase at the big box store when I got behind in the payments years ago or the recent late on the department store credit card when my dog ate the statement?’
When it comes to mortgage loans, credit reports can sometimes make or break an approval. Understanding credit is a key component in a loan officer’s toolbox. Fixing credit is the silver bullet that few possess. Oftentimes a single error on a credit report can play havoc on one’s score. There are many solutions to correct misinformation and update a score within as little as 3 business days.
Along with credit is having the right loan product to suit the client’s needs. Whether it is a new commercial property acquisition, expansion, rehab or pre-foreclosure, having the correct product put in place can make the difference. Oftentimes when a bank declines a client’s loan it is simply not a good fit for the credit box they work within. The credit box is the list of parameters they adhere to in order to approve a loan. A bank may be unaware of the other market products available simply because of their established guidelines. One lender may have a government-backed product that they will do only within certain guidelines. They may not be accepting any more hospitality loans but welcome self-storage facilities. Some will underwrite based strictly on the accepted guidelines whereas others will make exceptions based on compensating factors such as experience, liquidity and CRE holdings. There are layered approaches to most products and what one lender will not entertain another will approve, even if declined several times previously. CRE mortgage brokers traditionally have a long list of lenders, from banks to credit unions as well as private money to solve the borrower’s financing needs.
Sometimes there’s just one missing piece of the puzzle that can turn that ‘decline’ into an ‘approval’.
For example, a client had been waiting on a lender to close their loan for a year and a half…read that again. Yes, a full 18 months. We had them approved in 30 days. Another was declined when an insurance matter came up on a vehicle purchase with an ex-girlfriend that went very wrong. It had been reported as stolen and reported to the insurance as a loss. That took a minute to clear up but we did close. It too had been declined several times before being sent in to us.
Then there was a borrower who was referred to do a hard money loan but upon closer investigation, we were able to get him an SBA note plus cash out for out-of-pocket expenses for his business. The new note stabilized the cash flow and provided a long-term financing solution.
Proximity to major metro markets can also affect the closing. Though a nationwide product is available, if there are no comps in a tertiary market, the value may not be verifiable with an appraisal making it very difficult to close with a national lender. That’s when a local bank or credit union may make a big difference. A few years ago, I had a borrower who had been declined a few times. He was a professional beekeeper and owned a self-storage facility in Washington state. There were no local comparables for value and he had owner financing. The note was due so he needed to put permanent financing in place. A key relationship with a local credit union provided a local perspective on valuations as well as a timely closing.
Whether it’s a corrected credit score, the perfect loan product or an in person handshake, sometimes it’s an eager set of ears and a ready financial tool box that create closings.
Anita Huedepohl
Liberty Funding
www.libertynationwide.com
615.417.4710
