Oftentimes, borrowers in these situations go with
permanent loans that have less attractive terms than
agency loans. In these scenarios, a bridge loan converted
into permanent financing through an agency is often a
better long-term economic decision for the borrower.
A bridge loan can give the borrower the ability to accomplish everything they need. They can close under
a tight timeline while securing agency financing to
replace the bridge loan at a later date.
The right lender can help a broker save the day. It’s
important to look for a lender that has capital-market
experience, knows agency financing and can execute
in a short time frame. While no short-term financing
program is a universal fit for every borrower, there are
certain situations that make bridge-to-agency financing
a good solution. Your lender should know which prod-
ucts are the right fit and offer a solution at a reasonable
cost to the borrower.
Flexibility is key when choosing the right bridge loan.
A borrower should be allowed to prepay at any time
with no more than six months of yield maintenance on
the loan. The bridge loan should also close very quickly,
preferably in less than a month. The whole idea is to
give the borrower control over the situation as quickly
as possible, whether it’s by stabilizing a property or
utilizing 1031 funds that have negative tax implications if
not dispersed by a specific date. A bridge loan that takes
too long to close doesn’t solve any of these problems.
A bridge loan also must have comparable leverage to
an agency’s permanent loan so the borrower doesn’t
have to come up with too much additional out-of-pocket
cash. For stabilized or close-to-stabilized properties,
the bridge loan should have a single-digit interest rate.
In the end, a borrower should expect some additional
costs, but to help mitigate sticker shock, a commercial
mortgage broker should look for origination fees from a
bridge lender to be in the 1 percent to 2 percent range.
n n n
For a broker with a client purchasing a multifamily property, having a good bridge lender in your back pocket
can salvage a deal that looks like it might go off the rails.
The broker becomes a hero, and they can potentially
earn an extra commission while still offering the borrower the best deal possible. If your client must close on
a multifamily property but an agency loan is causing a
roadblock, a bridge-to-agency loan scenario is a great
alternative to less desirable permanent financing. n
should be allowed
to prepay at any
time with no more
than six months of
on the loan.”
<< Multifamily continued from Page 64
Agency-based loans through the
Federal Housing Administration (FHA),
the U.S. Department of Agriculture’s
Rural Housing Service (RHS), Fannie
Mae and Freddie Mac have plenty of
advantages, making them the preferred long-term financing option for
many investors in the multifamily market.
n That said, there are situations when
an agency’s approval timeline impedes
borrower to consider less-attractive
permanent financing in the form of a
conventional bank loan or commercial
mortgage-backed securities (CMBS)
loan. When this happens, having a
strong bridge lender on speed dial can
make a commercial mortgage broker
look likea herotoaborrower. ➤
63 ScotsmanGudeCommerca Edton ScotsmanGuide.com January2018