SBL Underwriting
I'm looking at an underwriting analyst position with a team that does Freddie Mac SBLs. I've seen some older topics on this, but they didn't necessarily answer all of my questions.
Did anyone on here personally start in a role like this or know someone who has? If so, what are the exit opportunities? Assuming I end up not wanting to be an underwriter. Also, what can I expect in terms of compensation?
Thanks!
I would advise against SBL. Its a niche product and the skills don't really transfer over well to other areas of CRE. I personally don't understand a business model that intentionally restricts loan amounts and larger business. For example, you'd have to turn down a $10MM loan. That is idiotic to me. Hold out for a position in conventional lending $5MM+.
The average loan size is likely nowhere near $6-7MM given that the max loan size is $7MM. The average is probably closer to $2-3MM. And in SBL, you see a lot of deals that fall through the cracks even late in the game because you're dealing with unsophisticated borrowers. You do 2-3x more work than you would on the conventional side, but you're not getting 2-3x more pay.
If you actually want to start buying your own multifamily, SBL would be very good experience as you see how these little $3mm deals are put together. The first deal you buy is most likely not going to be a deal that’s financed with a $10mm Fannie or Freddie loan.
Yes the larger deals are sexier and get in the headlines but $20mm agency loans are usually layups as the borrowers are strong, the sellers are strong and there fewer curveballs vs. SBL. Your exit ops for underwriting large agency loans are staying in underwriting or moving to a capital markets role at some large institutional multifamily investor where you have no equity. I think your better positioned to buy your own deal if you’re in sbl.
Freddie sbl underwriting is probably a grind though. Your often dealing with class c, less sophisticated buyers, mom and pop sellers or borrowers that don’t have great financials, etc. plus they seem to be understaffed as it seems to take longer and longer to get commitments from Freddie...
I started in SBL and am now on a team that specializes in construction & transitional loans. I'm curious as to what knowledge you actually think one could gain in SBL that would better position you to invest in a small multi deal.
I'm not trying to be combative and I certainly don't think any of us in debt brokerage are doing God's work. I just remember being totally in awe about how much money these SBL originators were making (while legitimately knowing nothing about real estate!). As for the underwriters- sure, dealing with bad (stupid) borrowers could be a headache and handwritten rent rolls are a bitch to read. But ultimately I do not think there is any material knowledge to be gained.
oof
Agreed. I’m not saying Freddie sbl underwriting is super analytical or complex but the borrowers are typically local, entrepreneurial type people that are way more relatable than an institutional or even a mid-market regional investor. If you’re underwriting a Freddie sbl deal, it’s much more likely you’re thinking “shit, I can do this...” than if you’re underwriting $20mm Fannie loans. You see how average people (or less than average as there are a lot of stupid borrowers in the sbl world) put deals together, do a massive cash out refi on a 40-unit class c deal, etc. I cut my teeth in debt fund world and mostly worked on larger ($20mm+ deals). It wasn’t until I moved to the broker side until I realized how easy it is to get 80% non recourse financing on a $3mm multifamily deal. Now I’m buying a $3mm deal and financing with Freddie sbl....
How are SBL commissions calculated? Are they a percent of the loan? Or do the GSE’s pay a flat fee?
Nah. It's for a CBRE/JLL/C&W type.
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