Banker's Loan Processing

No suitable players found.

To view the video content on this page you must either.

• Get Adobe Flashplayer
• Use a browser that supports HTML 5

Banker's Loan Processing ("BLP") is an outsourced solution that allows a borrower's loan payments to be fixed, while your bank receives a floating rate to better match funding sources. Under the program, your bank provides all loan servicing and remains the primary borrower contact point. We handle all hedging activities on our own books so you don't have to.

Business Challenge

Demand from community banks pushed us to create this enhanced loan hedging program and even more details follow:

• An expectation of rising future rates, coupled with intense competition for commercial loans, is pushing borrowers toward long-term fixed-rate loans.
• Most community banks' deposits are shorter-term in nature and are interest rate sensitive. This compresses margins when fixed rate assets are originated and interest rates rise.
• Many community banks see hedging as a complex process, creating an inherent conflict when borrowers seek long-term fixed-rate loans. This can result in a loss of clients, increased loan prepayments and lower profitability over time.
• Many community banks will originate long-term fixed-rate loans and sell them in the open market, or seek to match-fund by borrowing long-term funds at the FHLB. This strategy can transfer the client relationship to another company in the former, while using up critical liquidity and decreasing profitability in the latter.

Solution

BLP utilizes your loan origination and credit underwriting documents, keeping the process simple and consistent with your current practices.

Loans acceptable under the program include those with a maturity of up to 20 years; individual loan amounts as large as $50mm or as small as $500k; LTVs up to 85% and debt coverage minimums between 1.10X to 1.35X, depending on loan type. To qualify for the program, loans must contain prepayment language.

Acceptable real estate property types include: multifamily, hospitality, self storage, industrial, office or retail.

All up-front fees that are collected are retained by you.

Benefits

• Easy-to-understand
• Designed to meet borrowers' needs
• Floating rate loan coupon is paid to you
• Broad structuring flexibility
• Reduced credit risk to the borrower and reduced interest rate risk to you
• Increased cross-sell opportunity because of a longer relationship with the client
• Reduced credit risk because debt service coverage is stabilized
• Reduced likelihood of prepayment
• Eliminates the need to perform hedge accounting

How it Works

• Find a commercial borrower interested in a long-term, fixed rate loan
• Call us for a current floating rate quote based on loan terms
• Review and sign the BLP loan servicing agreement
• Approve and book a floating rate loan