September 5, 2018
Q: How do you as a lender adjust your approach to a market that is long into an upcycle?
A: As the current cycle becomes dated, the key will be to avoid weak deals, weak asset classes and stretch locations and markets. An astute lender can do so by remaining steadfast on advance rates, borrower strength, and by sticking to resilient asset classes in strong markets with steady demand drivers.
To win opportunities with these characteristics, a lender needs to be able to give on pricing, but never on credit quality. The best people, coupled with the best locations, can protect lenders against a turning tide. These opportunities come about by working with highly regarded and experienced mortgage bankers, who have top-flight borrowers as clients. They also have deep market knowledge and can help lenders understand if a property is appropriately positioned for success, both on the way up and on the way down.
Q: What are the advantages of working with a mortgage broker centric platform, as opposed to being a direct to borrower lender?
A: Mortgage brokers have several advantages when they choose to work with broker-centric lenders as opposed to those that work directly with borrowers.
At Alliant, the mortgage broker is our client, not the direct borrower. Therefore, our focus is providing the best service to the mortgage broker community without directly marketing to the same borrowers. This type of platform enables us to work with our mortgage brokers as a team, to structure transactions that fit a borrower’s needs.
This teamwork continues from the beginning and throughout the relationship with the mortgage broker. In the event a borrower directly requests a new loan from us, we protect our clients and would refer the borrower back to the source that introduced Alliant to them.
Moreover, we don’t typically charge an origination fee above what the mortgage broker is charging to the borrower. This is a big advantage for our clients. Mortgage brokers can introduce Alliant’s loan program and the terms of their transaction to their client, without a concern that the borrower is going to be upset by significant fees.
We believe that borrowers searching for financing are best served by working with mortgage brokers, as opposed to a single direct lender. In the end, they’re able to be fully-satisfied with their financing partner, because their broker provided a variety of terms and structures from a myriad of sources.
Q: How is technology impacting the use of commercial space, and how are you integrating these changes into your lending decisions?
A: From multifamily to parking lots, technology is transforming the demand for and utilization of space. While technology’s impact on each asset class is both nuanced and unique, lenders cannot take a “business as usual” approach to the marketplace. Instead, all asset classes have to be examined from new angles and under a growing number of “what if” scenarios.
Take parking lots, for example. Will autonomous cars transform the demand for parking lots in a positive or negative way? Is there a demographic profile that seems more likely to embrace self-driving cars or cars-on-demand? If so, what does this mean for the standard parking ratios that we have come to associate with apartment buildings, suburban offices, etc.? If fewer parking spaces are required for urban apartment complexes, will this space savings result in the construction of more units?
The questions are almost endless, and each is deserving of scrutiny and contemplation. Even for shorter-term bridge loans, understanding current and future trends is essential, as these factors impact the viability of a sale at stabilization or the probability of a successful refinance.
For comments, questions or concerns, please contact Dennis Kaiser