For commercial mortgage brokers, choosing lenders to work with is a crucial decision in determining their success in the industry. Commercial lenders fall into two main categories: those who securitize and sell off their loans and those who don’t, or portfolio lenders. There are benefits to working with both types of lenders, but portfolio lenders can be a much better fit for your needs as a broker and the needs of your borrowers.
Here are some perks of working with a portfolio lender:
There are many lenders in the commercial mortgage industry who securitize and sell off their loans. Securitizing is when a lender converts (an asset, especially a loan) into marketable securities, typically for the purpose of raising cash by selling them to other investors. These types of lenders are subject to more restrictions because their ability to finance mortgage requests comes from investors who provide the funds. Because of this, lenders who securitize loans need to make sure that they can sell off the loans that they close in order to keep their investors happy. Conversely, portfolio lenders have a consistent source of funding and do not need to sell their loans.
Because portfolio lenders keep the commercial deals they fund for the life of the loan, they’re usually more flexible than lenders who securitize their mortgages. Because portfolio lenders don’t sell their loans, your borrower does not need to fit into a certain box that investors deem profitable. It also means that things like your borrower’s rate and terms are often more easily negotiated because a portfolio lender makes their own rules.
While commercial mortgage brokers are only involved with a borrower until closing, it’s important to consider your borrower’s experience once all the documents are signed. A lender who securitizes mortgages will eventually sell your borrower’s loan to another servicer. With a portfolio lender, your borrower will be familiar with the company who collects their monthly payment and can expect the same level of customer service throughout the life of their loan.
Both portfolio lenders and lenders that securitize loans can be great options for your commercial mortgage borrowers. As a broker, it’s important to work with a variety of lenders in order to provide your customers with the best possible experience and product. For many borrowers, a portfolio lender will be the right option because they are a direct funding source with flexibility and consistent customer service. Be sure to connect with a commercial portfolio lender in order to increase your commercial mortgage business.