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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Comments (3)

Apr 4, 2021 - 11:26am

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.

  • NA in RE - Other
Apr 4, 2021 - 4:33pm

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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