May 26th, 2010 9:29 PM by Chuck Green
Often I receive calls from clients asking for stated income commercial loan programs. Few people outside of the commercial mortgage business really understand what this means.
In years past, when loan guidelines were looser, "stated" programs often really meant "light doc", with limited personal client income documentation. These programs have completely disappeared from the mainstream commercial landscape. To find a stated income program in this market, we need to look into private and hard money lending.
Note however that current stated income programs are not truly stated income, in that a full income analysis of the building is always required. Rent rolls, operating statements, current and past years income and expense statements, leases - these are all required. Hard money "stated income" loans may not require personal tax returns, W2's, paystubs, etc....but there are no loan programs in commercial lending that will not require complete understanding of the income performance of the property in question.
In recent months more and more hard money and private money lenders have been pulling back and increasing their requirements for full documentation. Basically, with enormous demand for hard and private money, these lenders are becoming selective and not lending on many transactions that they would have funded in the past. Hard money lenders have been moving fast to manage their risks, and most will want a fully documented loan package.
Hard money lenders have moved into the realm formerly occupied by banks and commercial mortgage backed securities. With a high percentage of commercial bank loan fallout, the need for hard money has been tremendous. Most lenders - even hard money - are even more concerned about cash flow and and debt service than they are about value and equity.
The message here is to not expect too much from stated programs in today's tight lending market. Be prepared to provide full client financial data, and a complete characterization of the property from a financial perspective; both current and historical. Anything less than this will be extremely expensive.