Overview

 ·       As the loan broker in charge of procuring, your role is crucial in starting the potential loan process.  Highlighting your leadership during the initial inquiry fosters a sense of responsibility and adds value, making you feel essential in guiding the process and establishing trust with referral sources.  Your expertise and cooperation are highly appreciated and vital in this process.

·       The initial inquiry is a pivotal step in which engagement and responsibility are crucial.  As the procuring broker, you participate in and proactively initiate the potential loan transaction, making you a key player.  Ensure you understand and comply with all applicable legal and regulatory requirements at this step to maintain compliance and protect your practice.

·       The loan broker (agent) engages in a crucial initial inquiry with the prospective Borrower, discussing:

 o   Type of property,

o   Requested loan amount,

o   First or second lien position,

o   Value estimate,

o   Protective equity,

o   Loan purpose, use of net proceeds,

o   Source of proceeds to make monthly payments,

o   Exit strategy.

 ·       Empowerment through Proactive Role: You can take control of the transaction.  Your proactive role in the process not only ensures success but also makes you feel confident and valued as a leader in completing the loan transaction.

·       Is sufficient protective equity above the lien to satisfy the lender’s requirements?  Understanding this concept helps you feel competent and prepared in assessing the Borrower's financial stability, which is vital to your role in guiding clients effectively.

·       The opinion of value procedure is a critical but non-negotiable step in the loan transaction.  Your responsibility as an agent is to ensure the value is determined accurately, diligently, and carefully.  Your diligence in this process is crucial and a testament to the success of the loan transaction.

·       All value determinations at the beginning of the process are subject to obtaining a third-party independent appraisal during the processing period.  The Borrower usually pays for the appraiser.

·       Does the loan funding improve the Borrower’s financial circumstances or provide an interim period to fix the problems (Borrower and property) and regain economic stability?

·       Will the net proceeds of the new loan pay off the debt, reduce their outgoing expenses, and increase their cash flow?  With assistance from the real estate agent and the Borrower, the procuring broker should actively calculate the improved cash flow as part of the submission.  This calculation is not just a formality but a critical step in the loan application process, as it helps the lender assess the Borrower's improved financial condition after the loan closing.  It is essential to determine whether the new loan improves the Borrower's financial circumstances or provides an interim period to address the issue and regain economic stability.

·       Appraisal: Early in the conversation, it’s crucial to ensure the Borrower understands they must pay for an appraisal upfront.  Clarifying this step helps borrowers feel responsible and in control, fostering a sense of Partnership's's and confidence in the process, both of which are essential to a smooth transaction.

·       If the transaction is a commercial property, the Borrower must also pay for a Phase 1 environmental site assessment.

·       If a Borrower does not understand that they must pay for an appraisal and possibly a Phase 1 environmental site assessment, everything can be done for nothing.  The Borrower may be expecting a loan with no out-of-pocket expenses.  Clearly explain these costs upfront to manage expectations and prevent misunderstandings, which is essential for a smooth transaction.

·       A few lenders will not require an appraisal, do their internal valuation, and accept a limited phase one environmental site assessment.

·       In Outlook or other database programs, set up a lead file using the address and a (-) with the agent’s name for reference.  This file serves as a centralized location (depository) for all relevant information, making it easier to track the progress of the loan application.

·       Request the Borrower to send all the required exhibits for the loan transaction digitally.  This will allow you to place them in the designated digital file efficiently, eliminating cumbersome paper files and ensuring a streamlined process.

·       Go to Outlook, look up the property, and set up an email to yourself.  Include 2 or 3 references (e.g., Zillow, Redfin, Realtor), then send the email to yourself to add to your lead file.  This will provide an overview of the property’s condition, an estimate of its value, and a physical description.

·       It is crucial to obtain a comprehensive property profile from your chosen title company.  This detailed information will be valuable to your loan file, providing a thorough understanding of the property and its potential implications for the loan transaction.  When was the property purchased?  How much was paid?  What is the History of recordings?  What copies of the recorded documents are available for the property?

·       If the Borrower is an entity, it’s important to look them up on Google and the Secretary of State’s business search.  This thorough research demonstrates that your entity is valued and considered in the loan process, which reinforces your diligent, rigorous approach.

·       If the Borrower is an individual, look them up on Google and LinkedIn.

Place the data in the lead file.

·       If the property is in another state, look up Judicial vs non-judicial foreclosure.  Many lenders only make loans in non-judicial states.  A few exceptions apply, such as Florida and Texas, when the Borrower is an entity.  Some states provide for both methods.

·       The bare minimum documentation for a loan transaction is a completed application, the most recent payment statement, and three months’ bank statements.  To ensure thoroughness, verify the accuracy and consistency of these documents and, if necessary, consider additional financial evidence to support a more comprehensive assessment of the Borrower's economic stability.

·       The loan is a second trust deed.  Ensure you understand whether placing a second lien on the property is allowable.  The first lien may prohibit placing a junior lien on the property, particularly for commercial properties. 

·       On single one-unit to four units, you can place a second lien as a matter of Law.

·       An exception may be if the first trust deed is in a prior owner’s name and not the current owner’s.  In that case, you may want to have it passed by your attorney.

·       On units of five or greater and all commercial, industrial, and land, you must review the documents.  The prohibition for placing a junior lien on the property will be in the deed of trust or the loan agreement.  The deed of trust is a recorded instrument, but the loan agreement is not.  Sometimes, the prohibition appears only in the loan agreement, so a copy is not readily available as a recorded instrument.  You must request it from the Borrower.

·       If the Borrower is an individual and has a business, then obtain three months’ bank statements for both the Borrower and the company.

·       The key to having a business and personal account is to figure out the trail of cash flow.  Sometimes, a written explanation from the Borrower is necessary.

·       All commercial properties should go to a geo-tracker database to determine if the property or properties around it may be contaminated.  Download the summary and place it in your digital loan file.

 https://geotracker.waterboards.ca.gov/map/