Tips & Resources

 

MIC has prepared the following tips and resources for your convenience. This information can serve as an excellent primer for those new to commercial brokering and as a great resource for experienced brokers. Come back often, since we will be updating this information to include new hot articles and tips.

 

 

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Trends in the Mortgage Industry

 

The mortgage industry experienced incredible growth in 2002 driven primarily by some of the lowest interest rates since the 1960's. According to the Commerce Department, sales of new homes and apartments climbed 5 percent in December - the best 12 months for new housing since 1986. And, in the secondary market, brokers simply couldn't keep up with existing home owners trying to refinance.

 

 

 

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Richard C. Reimer

President

 

1099 Pine Country Court

Prescott, AZ 86303

 

Phone: 928.443.7749

Fax:      801.640.1896

E-mail: rreimer@mici-broker.com

Economists are optimistic for 2003 as well. However, there could be a significant shift in opportunities from the residential to commercial areas due to impending regulations and stablizing interest rates.

 

Key Changes Affecting Residential Profits:

  • Interest rates may not be going up, but they will stabilize, and as a result fewer residential refinance deals will occur.
  • Residential production levels are also projected to slip from a record $2.5 trillion in 2002 to $2 trillion in 2003. Brokers account for about 65% of the volume and make about 2% of the loan amount in commissions.1 Correspondingly, residential mortgage commissions would drop 20% -- from $32.5 billion to $26 billion in 2003.
  • The Real Estate Settlement Procedures Act (RESPA), which seeks to protect consumers from even the smallest percent of brokers who prey on the low-income and less educated. RESPA would eliminate the yield spread premium (YSP). Approximately 45% of mortgage broker income comes from YSP, and therefore broker compensation would actually drop by 56% -- from $32.5 billion in 2002 to $14.3 billion if RESPA passes. Moreover, RESPA would impose rules that most brokers can't meet.
  • Whether RESPA passes or not, it has already triggered other regulations at the state and local levels which will affect residential brokers. (see RESPA article above for more info.)

The good news is that RESPA will not affect the commercial market. See the next section on this.

 

Click here to read further about these changes and RESPA

 

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Keys to Success - Commercial Brokering

 

While the residential market is experiencing constant threats from RESPA and the changing economy (see above), the commercial market will not be affected. As such, commercial brokering offers great opportunities to both existing and new brokers.

 

The requirements for commercial brokering, however, are different from residential in the following ways:

  • Commercial brokering requires extensive knowledge of specialty lenders for each industry or business - no one lender handles all types of commercial loans.
  • Approval takes longer and involves additional requirements - while residential loans can be pre-approved by a computer, commercial loans involve submitting cover letters, executive summaries and even business plans to lenders.
  • Success often depends on the broker's relationship with the lender - the commercial loan process is not only extensive, but it's subjective. One well written executive summary may get the loan, while another may cause the loan to be rejected. And, established relationships with bankers often help.

The successful broker will acquire the skills and experience necessary to fulfill the above requirements.

 

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Steps to Becoming a Commercial Broker

 

Becoming a commercial broker requires the right training and experience. Needless to say, experience takes time. But, believe it or not, both training and experience can be best obtained faster and more cost-effectively in the following way:

  • Get training only from a school...or seasoned broker...with access to the right tools and a clear process for presenting commercial loans to lenders.
  • Partner with another broker already experienced in commercial loans when determing which lenders to use and how to present to each of them.
  • Leverage your existing contacts. This is particularly advantageous for residential brokers moving into commercial brokering.

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RESPA Updates

 

The issues related to RESPA are complex and constantly changing. For this reason, we've provided convenient links to other sites with updated news and information on this act.

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Essential Resource Links

 

Free Online Industry News Resources:

Government Agencies:

Associations:

Other Sources (charging a fee):

  • Commercial Meeting Lender Data Bank - provider of business, financial and competitive information derived from the U.S. Securities and Exchange Commission.
  • Crittenden Directory - country's leading publisher of real estate and insurance industry newsletters and directories.
  • FW Dodge Reports - the largest source of project news, plans and specs and analysis data.
  • PKF Consulting - owns the database for Trends in the Hotel Industry, the statistical review of U.S. hotel operations.
  • Smith Travel Research - the recognized leader in providing accurate, actionable information and analysis to the lodging industry

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When You Need More Help

 

Mortgage Industry Consultants has over 35 years experience in the mortgage industry, particularly within commercial. We welcome any opportunity to help you succeed by providing you with the right training/seminars or consulting you'll need.

 

Training Seminars cover:

  • Basic concepts of commercial lending
  • Complexities of various property types
  • Executive Summary writing
  • Successfully closing the deal
  • Actual case studies with real deals
  • Software for analyzing a deal

And even after the seminar, MIC will be there to partner with you and to provide you with critical expertise, analytical tools, and the lender resources you'll need.

 

Please contact us directly for more information at:

(866) 968-4274
rreimer@mici-broker.com

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