In the height of the boom, lenders made loans with little or no consideration of the quality of the collateral or the strength of the borrower. Billions of dollars went out on “liar” loans with no documentation, and billions more were lent without the completion of proper appraisals. Commercial properties frequently received mortgages on the basis of underwriting which was, at best, creative.
Lenders have woken up and realized how damaging these improper practices have been to their bottom lines. As such, today's loans require a great deal of documentation about the borrower, the property, its income, and the condition of its title. Given that most of this property information is not formally reported anywhere, finding it can be a challenge.
In addition to the need to compile a complete due diligence package to obtain a loan, lenders are also requiring more reporting on an investment property's operations than before. Although annual reporting was a hallmark of multi-family loans made by Fannie Mae and Freddie Mac, reporting requirements are becoming more and more prevalent in investment property loans spanning all lender types and all property types. One of the most challenging lender requirements today is reporting on tenant financial performance. Given that many landlords do not have clauses in their leases requiring their tenants to report on sales and profits, it has become hard to meet lender requirements for both servicing an existing loan and placing a new one.
In the brave new financing world of the 2010's, complete and accurate property information is more than just a useful tool. It is an absolute necessity for owners who want to access today's debt markets.
Investment Real Estate Brokerage