Get StartedDividerCommercial LoansDividerCommercial Mortgage ResourcesDividerBlogDividerMy Account
FAQ   Contact   Home

How Much Information is Too Much?

Published: July 21, 2008

When a borrower or broker creates a commercial mortgage proposal at Lendicom, her description of the project is required to be fairly exhaustive. The proposal process involves approximately three dozen distinct questions concerning property type and use, ownership history, condition, financials, etc., all spread over a dozen or so pages.

The reasons this might benefit both lenders and brokers and borrowers are:

  1. Providing more information to lenders up front enables them to make a real, substantive decision about whether or not to follow up.
  2. Requiring this extent of information from whomever is submitting the proposal sets a sort of minimum threshold of knowledge and engagement. If you don't know enough about the project to finish the proposal process and/or are not willing to spend some real time answering questions about the project details and engaging with lenders through the application, then the chances that the loan is fundable are pretty slim.

However:

  1. Nobody likes filling out forms.
  2. Perhaps lenders can in fact make a substantive initial decision based on a more limited set of criteria.
  3. Furthermore, perhaps lenders should not make substantive decisions about a proposal based on its more arcane aspects until they have actually talked to the broker or borrower.
  4. Perhaps the more detailed information is not worth a whole lot anyway until it is verified by P&L statements, tax returns etc.

So, we are considering the following options:

  1. Reduce the proposal questionnaire to the dozen or so questions we use when matching proposals to programs (the other questions are simply for the lender's information).
  2. Allow brokers and borrowers to submit loan proposals when answering only these dozen questions, but also allow them to enter the additional information if they wish.
  3. Keep some questions not used in matching required (property income specs, for instance) but also reduce the overall number of required questions.

What do you think? How much information should an initial loan proposal gather? If you're a lender, how much information do you need/want from an initial proposal? If you're a borrower or broker, how much information do you want to enter? How much are you willing to enter? Have you ever bailed out of the proposal questionnaire part-way through? If so, why?

Leave us a comment and let us know.

Back to blog index

Write a comment

  • Required fields are marked with *.

Willie Pena
Posts: 9
Comment
Re: How Much Information is Too Much?
Reply #5 on : Tue July 22, 2008, 10:30:41
I am willing to enter the basics, like a DSCR calc, property location, property type, credit score, etc. Too many times I have filled out a huge submission form only to hear back…”Oh, we don’t lend on that property type”, or “That credit score is too low for us”. If I could just provide a dozen or factors common to most commercial loans, and have the lender reply with a RANGE of rates and points, that is most helpful because I at least know I have a shot with that lender, as opposed to filling out each one’s form for a deal that has no chance.
Jeffrey Babb
Posts: 9
Comment
Re: How Much Information is Too Much?
Reply #4 on : Tue July 22, 2008, 10:30:20
You asked for opinions, so here is mine. Your system is extremely non-user friendly, which is why I have decided against using it.

I have over 30 years experience as a lender and as a broker. I think the lender only needs a general idea of the loan request initially to determine if there is any interest. Upon my initial conversation with the lender, we can see if they are still interested, at which time I will give them the full package. That works out fine on other sites!

If you change your procedure let me know; I may use it. But I believe you need to change it furhter than you indicate. I think you have allowed a computer nerd to over-ride common sense.
Mark C. Mahony
Posts: 9
Comment
Re: How Much Information is Too Much?
Reply #3 on : Tue July 22, 2008, 10:29:57
As a long time commercial mortgage broker with a large proprietary lender data base, I think the required questions you ask are fair and necessary for a lender to make a valid upfront decision without wasting time. In today’s lending environment, with the large influx of residential brokers grabbing any commercial loan without the experience or knowledge of handling upfront due diligence, lenders can be overrun with unqualified deals.

That being said, I would like to see the assessor’s valuation eliminated as a required question. Additionally, you need to have a better filter between the hard money lenders that are always on the list of lenders that pops up, and conventional lenders that many submissions only require. Secondly, the ability to submit to all qualified lenders listed at once would be a huge time saver for the brokers and make your search engine that much more attractive.
Last Edit: July 22, 2008, 10:31:36 by heinrich  
Shelby Bateson
Posts: 9
Comment
Re: How Much Information is Too Much?
Reply #2 on : Tue July 22, 2008, 10:29:28
My experience in trying to get commercial lender attention is that most want a summary of the proposal from the borrower. There are some very important lender requirements in order to consider a loan, which of course include the obvious, such as loan amount, type of loan, location, etc. But I also believe a huge comment section where we enter a summary would be a huge plus for consideration for the lenders.

In almost every case, I have very detailed exec summaries from my clients, as well as pro formas regarding how the funds will be used. I also often have appraisals. Some lenders do care about credit scores, but many do not. Most care about how much money the borrower is bringing to the project as well.

YOur loan classifications are not broad enough. I currently have several loans that are not only purchase, but ground up construction, so that combined option should be offered as well.

Thanks for your questions. I do believe that answering all the questions is very time consuming, and often not necessary as an initial screening process. I hope you are checking with lenders to see what criteria they want or require in this initial submission.
George Wilson
Posts: 9
Comment
Re: How Much Information is Too Much?
Reply #1 on : Tue July 22, 2008, 10:28:58
Actually, it makes sense to the borrower, the broker and the lender.

The borrower because if he doesn't have all of the information at his fingertips he at least knows what may be required of him. He won't become discouraged and go somewhere else.

The lender because he doesn't need to wade through too much information in order to express an interest. There is always time to get more information ("conditions")instead of setting the project aside until "later". It actually adds to the underwriting time.

The broker because if he has to "hit the client between the eyes" before he's got him securely on the hook he may lose him. A bite at a time is better.