SBL loans
Whats your take on Freddie/Fannie's SBL program? How are loans small as $750,000 to $7.5 million even profitable for companies like Berkadia, Walker & Dunlop, etc? Appreciate any insights, thank you!
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Some of those companies you mentioned won't go all the way down to the minimum unless it's for a very important client relationship. Think actual minimum of say $1.5M or so.
They make their money by picking up a few points on the back end when they trade the loan (they can go higher percentage wise than they can on bigger loans) in addition to the 1% up front, and by doing a lot of them.
Appreciate the response, thank you! On your point about doing smaller loans for important clients and relationships, who exactly are borrowers for the product? Mostly first time commercial/non institutional borrowers? I was thinking a tier or two below Tru America/LEM type borrowers? And when you say important relationships, is it the possibility of repeat business or earning some cross sell business like investment sales?
On getting a few points on the back end when they trade the loan, why do they command a premium compared to bigger loans? I do not understand the reason. And is 1% par for the course on the front end because it's smaller loans? I work on bigger loans and it is really hard to get 1%. If they get 1% on the front end and a couple of points on the back end, seems like there is some cushion to pay a broker half a point to a point. Do they always do that? Is that one way the agency lenders win business vs the regional banks/credit unions that compete in this small loan space? I am very new to this space so I really appreciate the insights and I am grateful!
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