Pub. 7 2017-2018 Issue 1

22 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S Call us today at 303.860.0242 or refer a small business anytime at coloradoenterprisefund.org Financing startups and existing businesses up to $500K plus SBA loans up to $250K The Roost Celebrating YEARS OF IMPACT Most banks are familiar with securitized transactions through theSmall BusinessAdministration “SBA” or for banks in more rural settings theUnitedStatesDepartment of Agriculture or “USDA”. These two government agencies play a significant role in financing small business loans. Practically all banks are familiar with the two GSE’s Fannie Mae andFreddieMac aswell as theFederalHousingAdministra- tion “FHA” loans that comprise the secondary market for single familymortgages. The approachof utilizing standardizedunder- writing, which carries a guarantee or rating of some type allows banks to tap the liquidity of the public markets and preserve the capacity on their balance sheets for portfolio loans. Some even keep the servicing while others may choose to sell it to another servicing company. The lesser known opportunity for many commercial banks is in the capital markets for multifamily loans. Some of the tra- ditional SFR purchasers Fannie Mae, Freddie Mac & FHA (via HUD) provide both underwriting and placement services to the multifamily segment.While the SFRsegment is larger by volume the multifamily market is significant. For example Freddie Mac issued an unprecedented $51.2 billion in multifamily securities in 2016 and was the top multifamily lender in the US for the second consecutive year. Fannie Mae closed 2016 with $55.3 billion infinancing.HUDwithFHA insurance issued$8.3billion for a combined total of $114.8 billion. The vast majority of com- panies which lead in the securitized multifamily loan space are not traditional commercial banks but rather specialty mortgage banks. Thismeans theymake an ally rather than a competitor of commercial banks becausemortgage banks are non-depository. Depending on their licensure they may offer a single securitized loan product or a handful. They do not offer any other financial products to customers. Think of them as specialists, like your SBA representative. The bank account executive will remain the quarterback for the relationship and use the “special teams” as needed to create value for clients or prospects that fall outside the banks traditional credit box. The concept of creating a capital markets desk at a bankmay seemdaunting if contemplating applying for the licensures.How- ever no licensure is required to profit from a mutually beneficial affiliate referral relationship. The typical securitized borrower is generally not a prospective traditional bank customer. That is because they are seeking higher leverage and non-recourse as well as to maximize cash-out proceeds. As banks may be giving pause to new multifamily construction loans, having a HUD/ FHA construction & permanent lender provides a viable option. In conclusion while capturing loan business is a zero sum game, it is not true for loan requests that fall outside the banks credit box.Whatmay have been a fielddecline turns into captur- ing fee revenue and winning a new bank customer. Setting up an internal capital markets desk that forms affil- iations with highly credible specialists adds value to prospects, customers andshareholders andcan increaseabanksbottomline directlywithnon-interest income aswell as build their reputation as a knowledgeable financial solutions provider.  Michael Thomas is Vice President of Multifamily & Healthcare at Gershman Mortgage, located in the Denver Office. 1 MFE Freddie Mac Leads Nation as Top Multifamily Lender for Second Year in a Row The approach of utilizing standardized underwriting, which carries a guarantee or rating of some type allows banks to tap the liquidity of the public markets and preserve the capacity on their balance sheets for portfolio loans. Some even keep the servicing while others may choose to sell it to another servicing company.   continued from page 21