Can you hide from an Underwriter?

A common misconception when submitting a request for CRE Financing is that negatives or blemishes should be hidden.?We have found this to not be the case.?Whether it be past credit challenges, deferred maintenance on the property, or perceived weakness on the part of the borrower, we see clients submit information and then try to Fred Astaire their way around the issue.?Our experience has shown us that everything gets uncovered, that is, everything which that particular lender cares about gets uncovered.?

For example, an owner is behind on the Property Taxes and they apply for a loan hoping that the loan proceeds can be used to bring them current.?They may even show the taxes being paid on their Profit & Loss Statements in an effort to make it appear that everything is normal.?In this case, there are two primary ways the lender would uncover the truth.?The preliminary title report would show them as delinquent with an unpaid balance. ?Additionally, the appraiser will most likely reach out to the county tax assessor's office as part of his due diligence and would uncover that information there.?It is now up to chance whether this particular lender will care about this or not, which could end in either a decline or a counteroffer.?

Alternatively, if this were presented to us up front, we would first look at our pool of lending sources that don’t care about that issue (guidelines do vary from bank to bank), or ones that are flexible around it to allow us to tell the story and/or mitigate it somehow (offering tax impounds, or pay it before underwriting for example).? When sending us your request, it is best practice to disclose any potential issues early so we can address them before submission, or match up to a lender that we know won’t see it as a challenge. If you have a challenging loan request, please reach out and we can discuss.

Michael Coffee | Capital Advisor | [email protected] | 503.866.8817