Navigating lending options for real estate financing

Often, even in today's lending environment, there are several options for Borrowers to consider when seeking financing secured by real estate, both commercial and residential.

However, there are pros and cons to consider when seeking out options for a mortgage loan.

Whether commercial or residential, borrowers can look to large bank and institutional lenders.  Some examples for commercial and/or residential lending in this category would be Wells Fargo, JPMorgan Chase or Bank of America.  Residential borrowers can also seek mortgage loans from online loan programs such as or, or go to a local credit union.

Then there are the mid-market and local community banks for both commercial and residential borrowers and the savings and loan associations for primarily residential borrowers.

Finally, for commercial borrowers there are the CMBS loans (commercial mortgaged back securities).  This latter market may be going dormant again, but we'll pretend there are still CMBS loans being made for this discussion.

When borrowers look at loan options they typically focus on where they can find the best rate .  The best rates are often with the large national lenders or online. It's hard for the small local lending institutions to compete in this arena. However, going with the lender with the lowest rate is only the best option if everything goes perfect for the life of the loan. Given today's economy it is worth considering all of the pros and cons, and not just the money.

There are several negatives to obtaining loans from the large national lenders.  CMBS loans in particular are heavily papered with documents that are rigid and not subject to much negotiation, and are expensive to obtain up front with the diligence reviews and legal opinions etc that are required for closing.  The loans issued by these larger lenders are frequently sold, so a borrower is typically dealing with some office in another state that is not affiliated with the original lender. CMBS loans are serviced by a mortgage servicer who doesn't own the loan. Try dealing with the loan servicer when things start to go sideways. Decisions cannot be made quickly, if at all. Opportunities to salvage the loan and minimize the losses are typically lost due to the slow bureaucratic maze to be navigated.

Everyone has heard the horror stories about robo-signers that have led to erroneous and improperly filed foreclosures.  This is a large lender problem; not for the local lenders.

On the flip side, local lending institutions, such as smaller regional banks, community banks, S&L's and credit unions, tend to hold the mortgages they issue for the life of the loan, are more involved in the community where the loans are being made and are more likely to work with a borrower when trouble hits.

When considering the lending options it is important to consider all of these issues and determine what works best for a given situation and the risks involved.


tifany underson said...

I agree. Some big lenders are not amicable to negotiate. How not fair is that?

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collection agency seattle said...

If you are saving or investing your money, it is better to put them in a large bank because it is safer and they can be bailed out by the government if they got into trouble. When borrowing, better go with the local institutions so that it will be more convenient and it will not be your problem if they go bankrupt.