What is your opinion of working at a commercial mortgage division of a bank versus a mortgage brokerage firm? I am interested your perceived Pros and Cons.
I currently work as a loan analyst at a commercial bank and and wanted to know how my position compares to the brokerage side.
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People have squabbled endlessly over terminology on here, so I'll start by saying that it sounds like you're talking about an intermediary vs working directly for the lender (bank). I would say, "It depends." Would I rather work at BofA doing balance sheet loans than in the debt placement group at Marcus & Millichap? Yes. Debt placement at HFF vs balance sheet loans at BofA? HFF. Debt placement at HFF vs CMBS origination at Goldman Sachs? GS.
Banker > Broker
I think it will depend based on the organization, but at our bank the commercial loan officers wear several hats--their job is to originate business, compile important documentation (sort of like a processor's job), manage current clients and assist with loan reviews and renewals. Their compensation is based on a holistic review of how well they produce, manage clients, quality of borrowers, and how well they work with credit and management. Generally speaking, loans are produced by managing current and past relationships with top clients and then bringing on a few new clients each year and weeding out the poorly performing borrowers or the low production borrowers. Loan terms are highly, highly negotiated and are very borrower specific.
Commercial mortgage brokers, on the other hand, have one job and one job only--that's to produce a loan. Generally speaking, they produce business any way they can--old, new, good, bad, etc. They wear one hat--production. Their job is to bring in business and place a loan with the best terms publicly available. I would think these loans are much more likely to be turned into CMBS.
my friend who is a loan analyst at a commercial bank only wears one hat...and its like underwriting/review docs..the same process every day...I'm not sure if the OP experience though if you are working a big bank doing cmbs originations or like balance sheet lending.
I agree with prospee
Loan analyst for the origination group is not the same as a commercial loan officer. The loan analyst is generally someone under 30 who works for the loan officer or the origination group at large; he typically will have limited experience in the business--he typically will do high level underwriting to make sure the transaction passes the sniff test. For example, he'll run lease comps or cap rate comps to see if the transaction even passes the eyeball test. Once an experienced loan officer and a loan analyst have worked together to make sure the file passes the eye ball test then the file can go into processing and underwriting.
So your friend isn't the loan officer. He's basically the loan officer's assistant.
I too am working as a “loan analyst” but I am on the commercial mortgage brokerage side rather than the bank side. I was wondering as how my role would compare if I was working on the “lender” side compared to the side I'm currently on (mortgage broker).
I'll chime in on how I spend my day, mostly creating marketing materials and client deliverables with some market research, details below. 1) Creating Loan Request Packages - on behalf of clients (for details google "loan request package" CCIM provides a great overview, I can't post links just yet). Once the package is created, we submit this to our lender partners, some lenders will want to proceed and offer a Term Sheet. Hopefully more than one lender shows interest (Term Sheet) and we advise the borrower and select the best financing option. 2) Loan Quotes - as stated above, CM brokers are always hunting for new business. CM Brokers solicit themselves in order to provide financing quotes to go along with property salespersons marketing materials. The underwriting on these is more back of the envelope, and we provide a few options with all the potential terms laid out. 3) Loan Processing - this is the least fascinating part; this involves pre filling out documents and loan applications, collecting files etc. Very administrative. 4) Market Research – Sales Comps, finding new properties for sale, finding new banks to add as partners, mining databases to see what banks/brokerage firms are financing recent deals in the markets we cover.
I'm curious what it would be like working for a lender in house, I could only imagine how much BS is required on the lender side if one is providing Fannie Mae/GSE financing.
The Loan Request Package The key to maximizing the loan amount and getting the best terms is to present the lender with a well-thought-out loan request package. Lenders are overwhelmed with loan requests today and they focus on the deals that require the least amount of time. If they don’t understand your request or if there is missing or incorrect information, they will likely put the deal behind other requests that they can quickly review and quote.
Here is a checklist of information lenders look for:
Specific loan request including the loan amount, term, and amortization Physical address of the property At least eight color photos of the property Legal name of the ownership entity, including the general partner or managing member names and percentage ownership The current rent roll, including tenant names, square footage and space size, move-in dates, and monthly rent Physical occupancy for the trailing 12 months (month by month) Rent collections for the trailing 12 months (month by month) Copy of the standard lease agreement Recent rent delinquency report Description of construction (Concrete, brick, or metal?) and property details (On-site apartment for management? On-site property management office?) Rent comparables for similar properties in the area Actual balance sheets and profit and loss statements for 2009, 2010, and year-to-date 2011. Describe any income dips and out-of-the-ordinary or non-recurring operating expenses List of immediate repairs Description of major improvements made to the property in the past five years Copy of a previous appraisal, if available Résumé on the borrower, including Web site Year the property was acquired and what the acquisition cost was (contract price plus closing costs) Balance on the existing loan, along with the lender name, maturity date, and interest rate, as well as a copy of the latest mortgage statement; provide same information for second mortgage List of environmental issues Description of any exceptions that may show up on title, such as easements, parking, liens, etc. Explanation of any irregularities, such as above-average vacancy or unusually high or erratic operating expenses or income Indication of the combined net worth and liquidity of the key principals within the borrowing entity Description of any past or present loan defaults, lawsuits, foreclosures, bankruptcies, or any other credit issues
No offense to anyone (we all have our tastes), but I am so glad I don't do this work anymore.
So what would the compensation be structured for a commercial loan officer? From what I am reading above bank loan officers are compensated depending on a number of factors including: the quality of the loans they originate, quality of the borrower and the smoothness of the transaction. The mortgage brokers just get a flat fee, usually 1%, of the loan amount.
Lets say the commercial loan officer produced 200 Million in loans in 1 year. What would they most likely make at a commercial bank? ....Mortgage brokers would have 2 Million in fees(split with the brokerage company, obviously).
Which one do you guys prefer?
A $200 million commercial loan officer is a valuable loan officer. He's obviously doing something right, although he could have 4-5 deals that would produce $200 million in loans. His deals, however, are assisted by his extensive staff, management's flexibility with terms, quality of depository services, and other things that may be outside of his control. Just ball parking that a $200 million producer may make around $175,000 - $200,000/year. Doesn't seem like a lot for that amount of production, but like I said, that could just be 4 or 5 deals from 3 or 4 clients who are using the bank because of the overall package, which includes the loan officer relationship.
Mortgage broker producing $200 million/year--yikes, that's hard to say. $200 million isn't a ridiculous amount for commercial lending. There are single family loan officers who can do that much. But a $200 million producer may be making $400-500,000, depending on the economy, types of loan, structures, etc. Your highest quality borrowers probably have regular banking relationships so it's not easy to produce high quality CRE loans. They'll definitely be compensated well for bringing in the business.
Just for a data point, an originator at my shop (balance sheet lender, structured, high yield deals) goal was $300MM in production for the year. Did about $350-400MM. Makes almost $200k base and all-in around $350-400k.
I've been in CRE lending in San Diego for 20yrs. I now mostly sell MF. I know tons of CRE loan brokers. Most of them place loans at regional lenders, not CMBS.
Also, loan originators at banks make 25bps to 40bps on loan dollars. CRE banks, even big ones are generally not lending more than $25-50mil to a borrower at any given time. This can be across multiple loans, you're still going to have that loan limit. We have two of the top Chase MF lenders in San Diego. When one of them retired a few years back (female producer), she was funding $400mil a year with $1mil to $5mil loans at a time. She was making millions, not hundreds of thousands per year.
I have friends that are directors/originators at Agency lenders. They make $100k or so base + 40bps on loan dollars they produce. A $100mil year for them is nearly $500k of income.
The issue really is the protection for the broker. For example, a broker obtains commitments from three different lender, the client can then go take that commitment to another lender - have them commit and then not pay a brokerage fee.
always work on an exclusive basis
I like Prospie's take on it. Would agree with his whole statement. With that being said.
If we are comparing regional bank or national (wells, U.S) to HFF. Get the hell over to HFF right now.
Now 6 years ago HFF would have canned you and the bank may have held on to you. Now, unless you suck, they (HFF, CBRE, brokers) need people bad and movement upwards can be quick depending on location. Plus they usually spread you around from Investment Sales to Debt so you learn a bit of both (not always).
Producing $200MM / year in commercial lending is pretty rare - even in the large mid market groups at B of A, Wells (source - I was offered a job by Wells RCBO group and talked with all the people in that office).
Those groups do have large transactions but since it's Balance Sheet lending they typically will only hold $25M-$100MM max on a deal. And trust me, a $250MM deal in a mid-market setting doesn't come around a whole lot. But I guess it depends what market you're in.
My goal (at a regional Bank) is $30MM a year new biz while managing a portfolio of current clients/deals of ~$100MM. All-in comp for me is ~$200K if I am having an average year - $250K if I'm crushing.
That comp is similar for the BB mid-market groups at a VP level.
I've worked with loan brokers (including Marcus Millichap) and while they have to know some stuff, they're focus is not underwriting, analysis, etc etc. They make a very baseline info package with a tiny dose of a little u/w and go to market with it. Their job is a pure sales job and it is to get the client the best rate/fee/structure. They also get stuck collecting all financials, formation docs, etc. they can make some good coin but it is all commission and very cut throat - you eat what you kill.
I think pay and career path decisions depends on your talent and abilities. If your a natural born salesperson AKA a "hunter" your best off at a place like HFF in a gateway market (NY, SF, LA, Miami) where you can earn $500K+ a year. But remember, very few % of sales people out there are true "hunters". If your more of a farmer, working for a bank as a loan officer/RM where you originate and portfolio manage may be a better fit since it offers a generous base salary and you could hit $250K total comp in a great year.
Agree 1000%.
From another thread, assume compensation is similar across the top 5 -10 firms. Refer to post # 11 >>> http://www.wallstreetoasis.com/forums/any-insights-on-hff
This is a great post.
Thanks for all the info
So I am an analyst at a commercial bank doing basic multifamily and commercial loans. Our small team does about 250 Million a year. I see what the brokers get paid, usually 1 or .75 percent, for literally forwarding rent rolls/documents from the client, and I am amazed. I understand brokers have to deal with the direct clients, but I think working for the lender requires deeper knowledge of finance and the entire transaction. What does an analyst at a mortgage brokerage make if their team has a lot of deal flow? How is compensation structured since their bosses(the mortgage broker) usually work on commission.
Just wondering because I am in a really good position now, but starting to think my compensation is not matching my earning potential. I am very interested in possibly transitioning to HFF or possibly a debt fund.
Good brokers are absolutely worth paying. Some deals need something of a needle in a haystack lender to take down. If you don't have deep lending relationships or a name that lenders will scramble for, you probably need that kind of broker to finance your deal. Don't discount the fact that sourcing business is not easy, and the top guys who seem to rake it in without doing much work probably busted their asses for years building a solid book of business. That said, I used to be a lender, and there are certainly some brokers out there who made me scratch my head wondering why they got paid.
Just to add another piece to the conversation, compensation for originators in the securitized lending world is typically structured as base salary + bonus, with the bonus calculated as a percentage of profitability, net of the base salary (depending on the group, about 10% of profits go to the originator, so a producer originating $300 million a year with 2% profitability should take home about $600,000 in total comp). Pay is volatile in that segment of lending, though, and all but the top guys can expect to get laid off in the lean years. E.g. I think Cantor and Ladder just closed a couple offices, as the expected CMBS volume from maturing 2006-2007 vintage loans doesn't seem to have materialized.
Does anyone have any color/insight into how Aaron Appel and Jonathan Schwartz from JLL broker all these debt deals? Why can’t other commercial mortgage brokers reach out these banks or the owners directly?
What work does that team do so well/differently to win all that work?
Other brokers can and do reach out to all the banks. They have relationships with the borrowers, and these borrowers like to use them, therefore they keep going back to them, and than they reach back out to the same banks. Without the borrowers, the relationships with the banks would be useless.
For the types of deals they do, much of it comes down to reputation. For instance, if they did the last 3 out of 5 $250MM loans in NY, you’re going to probably use them again for the next one of this size because you’re confident they can get the process done and Shepard the deal through. If you thought they couldn’t for some reason (maybe they mostly do office and this deal is retail, or maybe you think they have 10 deals going on right now and are too busy, so you go to the team down the street), you go to someone else.
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