Media Coverage

Home-Construction Lending Grows at Slower Pace

Wall Street Journal

Wall Street Journal, Kris Hudson - February 24,2015

Lending for home construction slowed its growth in the fourth quarter, underscoring that the home-building recovery remains restrained.

Outstanding loans for construction of residential projects of one to four units by lenders backed by the Federal Deposit Insurance Corp. totaled $51.2 billion in the fourth quarter, up 2.3% from the third, FDIC data released Tuesday show. That increase is smaller than the 3.8% gain in the third quarter and the 5.3% gain in the second.

Meanwhile, outstanding loans for all types of construction – residential and commercial alike – increased to $238.9 billion in the fourth quarter, up 3.6% from the third, the FDIC said. Both measures have slowly risen since hitting their nadir in Q1 2013.

“We’ll need to see additional lending going forward to support the growth in single-family construction that we expect in 2015,” said Robert Dietz, an economist with the National Association of Home Builders.

However, Mr. Dietz noted that a slowing in the growth rate toward the end of the year is “reasonable,” given that seasonal factors typically slow construction activity in favor of finalizing sales by the end of each year. He added that the total of outstanding loans for residential construction of one to four units is up 17% from a year earlier.

“The year-over-year growth looks good, and some builders are accessing nontraditional sources of financing such as equity partners,” Mr. Dietz said.

In context, lending remains significantly less than at its boom-time peak in the first quarter of 2008. The outstanding total for residential construction loans is nearly 73% less than its high of $186.3 billion. Similarly, the total for all construction is 62.2% less than its high of $631.8 billion.

Various lenders say the environment seems to be improving for additional lending.

“We’re definitely expecting that 2015 will exceed 2014,” said Pat Jackson, chief executive of Sabal Financial Group LP, a Newport Beach, Calif.-based lender with an $8.5 billion portfolio of loans and properties. Sabal is not regulated by the FDIC. “Already, just for the first quarter, we’re going to do as much as half of last year,” he said. “It’s because a lot of deals that we’ve been writing on with builders have come to fruition.”

Russ Ruhnke, senior vice president and leader of the Chicago-based Home Builder Finance Group at lender Associated Banc-Corp, said this year’s spring home-selling season will set the tone for the rest of the year. However, he noted that smaller, regional borrowers on the whole aren’t  yet as stable as lenders prefer. Some aren’t yet ready to accept terms appealing to lenders, such as restrictions on construction starts and pre-sale requirements.

“I believe we’re witnessing the natural progression of an improving sector,” Mr. Ruhnke said. “We’re seeing smaller lenders compete. But it’s still somewhat challenging to finance from a traditional lender perspective, because (borrowers) aren’t bringing the requisite balance sheets to the table. We’re seeing opportunities, and we expect to execute on increased volume in the coming quarters.”

Associated, with $27 billion in assets overall, is regulated  by the FDIC.

IStar Financial Inc.STAR -0.30%, a real estate investment trust specializing in mortgages, anticipates a gradual, cautious increase in construction lending this year. iStar, which isn’t regulated by the FDIC, has about $4 billion in assets under management, including land and construction loans.

“Most of us envision that 2015 will continue at a reasonably strong pace,” said Steven Magee, iStar’s executive vice president of land. “I think most lenders, including iStar, will put out more dollars in loans in ’15 than they did in ’14. I don’t know that t will be a large increase, but it will be based on some level of cautious, reasonable underwriting.”

Sabal Financial Aims Big for Small-Balance Lending

Commercial Real Estate Direct

Commercial Real Estate Direct, Orest Mandzy - February 10,2015

Sabal Financial Group, which started actively writing small-balance commercial mortgages only last June, so far has funded roughly $500 million of them.

And if the market continues to remain favorable, the company could very well originate $1 billion this year.

The Newport Beach, Calif., company, part owned by Oaktree Capital Management, funds its small-balance originations, those with balances between $1 million and $10 million, using a warehouse credit line. It also is one of six originators under Freddie Mac’s small-balance lending effort, under which it pursues loans of $1 million to $5 million.

It will write loans with terms of three, five, seven and 10 years, and, in order to leverage its balance sheet, it could sell or securitize some of them.

Community and regional banks, for instance, could be targets for its shorter-duration loans, while it could securitize its long-term paper. It’s already developed relationships with hundreds of community and regional banks as a result of its loan-acquisition business.

And it’s said to be in talks with Nomura Securities and Wells Fargo Securities about leading a deal involving less then $200 million of its long-term loans. Such a deal would be a test case and, if successful, should lead to subsequent securitizations.

Sabal has entered into a highly fragmented segment of the commercial lending market. The thinking is that some $160 billion to $180 billion of small-balance loans – up to $10 million in balance – get originated annually. The top 25 originators of such loans account for less than 35 percent of the market, and most of those originate fewer than $1 billion of loans annually.

Sabal, which relies on the mortgage broker community and doesn’t plan to be a direct lender, write loans of up to 75 percent of a collateral property’s value. Given their nature, loans its writes typically have some sort of recourse. The loans it so far has written have had an average loan-to-value ratio of 67 percent and debt-service coverage ratio of 1.4x.

If Sabal reaches its origination target, it would become one of the sector’s dominant players. That’s by design.

“Our business is small balance,” explained R. Patterson “Pat” Jackson, the company’s chief executive, who before founding the company had run IndyMac Commercial Lending Corp., which also pursued small-balance loans.

Sabal was founded specifically to take advantage of opportunities in the distressed-loan world. “We built our platform for this,” Jackson explained.

Many of the loans it bough, which previously were held by community and regional banks, had relatively small balances. As a result, it developed a servicing and asset-management capability specifically for small-balance loans.

The company also provided loan-valuation services to the FDIC, when it was actively shutting failed banks after the capital-markets collapse.

In 2012, with opportunities in the distressed-loan world becoming more challenging to find, the company started building out its origination capabilities. It started with a bridge lending program, through which it would write relatively small loans against value-add properties. The following year, it launched a joint-venture equity program, through which it would provide relatively small slugs of equity capital against small-capitalization properties.

All the while, the company has been collecting gobs of data on small-cap properties. It’s also developed an underwriting platform that it envisions will bolster its small-balance lending prospects. The secure platform, SNAP, gives loan brokers a preliminary loan term sheet after certain property criteria are plugged in. Its goal is to fund its loans 35 days after application. That compares with a delay of up to three months for similar bank-originated loans.

Sabal Plans First Small-Balance CRE Securitization in 2...


DebtWire, Eleanor Duncan, Ilaina Jonas and Max Adams - January 09,2015

Sabal Financial Group is planning to complete a small-balance commercial real estate securitization this year after launching its lending platform last year, according to CEO Pat Jackson.

“It has always been in our business model [to] use a capital markets securitization execution as a primary means to run and grow the business,” Jackson said.

Sabal does not have a deal in the works yet. It plans to test the market first by issuing non-rated deals around USD 40m in size, said Jackson. Sabal lends in the USD 1m-USD 10m range.

The small-balance commercial platform was launched in mid-2014, and has since originated a total of around USD 500m in small-balance CRE loans, Jackson said. The firm plans on doing substantially more volume this year, he said. Average loan size under the program last year was USD 2.7m, with average LTV of 67%. Around 60% of the firm’s production has been multifamily.

Buyers of the A tranches of the securitization are likely to be life insurance companies looking for typical safety deals, Jackson said. The B piece could appeal to a number of traditional CMBS B piece buyers, he added.

“Our deal(s) would be very granular in that our target [range] is USD 1m to USD 10m, which means that the risk profile would be a lot more durable,” he said.

So far, there have been two rated small-balance commercial deals backed by newly originated loans post-crisis — Velocity Commercial Capital’s USD 161m fixed-rate deal and ReadyCap Commercial’s USD 181.9m transaction — both in the second half of 2014.

One ABS investor speaking at the time of ReadyCap’s deal said that the deal was the only “true” CMBS to have come out so far. He called VCC 2014-1 more of a “stealth resi” than a “pure small-balance commercial” deal. He noted that the deal was underwritten by Fico scores, rather than property fundamentals.

“Last cycle proved that ABS-style small-balance CRE deals were not robust in a down cycle,” said Jackson. “We have not really ever contemplated going down that road.” The small-balance commercial loan market has traditionally been served by community banks, Jackson said.

But a lot of community banks are choosing to refinance their current books, rather than chasing new business, he said.

“Banks are continuing to be in and out of the market quarter by quarter depending on their balance sheet,” he said. “So we are getting rewarded by some of the deals that traditionally go to the local banks. We provide a nationwide solution to the wholesale channel and our broker network who really do value what we bring to the table. That is our competitive edge.”

How Sabal Joins Exclusive Club, Carrie Rossenfeld - January 06,2015

NEWPORT BEACH, CA—Sabal Financial Group L.P. has been approved by Freddie Mac as a seller/servicer in its new small-balance loan offering, which offers debt solutions for multifamily acquisitions and refinancing. Sabal is one of only six eligible seller/servicers approved by the GSE for the new program and will offer non-recourse mortgages ranging from $1 million to $5 million to eligible borrowers nationwide.

According to Pat Jackson, founder and CEO of Sabal, “As a national commercial real estate lender and a company whose core business interests focus on the small-balance loan arena, Freddie Mac’s new small-balance loan offering is a natural fit for us. Our expertise aligns well with Freddie Mac’s goals for this new multifamily debt program.”

The firm is also the only participant in the program employing the proprietary SNAP web-based technology to ensure efficient processes during pricing, underwriting, closing and funding of loans through the program. SNAP generates live quotes and automates portions of the application and closing process, ensuring speed to finance.

“Sabal Financial has placed technology at the center of its business processes from the start as a means to enable efficiency, speed and scalability in operations,” says Jackson. “We created SNAP specifically for our lending businesses, and it has allowed us to dramatically reduce our funding cycle while also providing our broker clients with a number of additional benefits.

Freddie Mac’s multifamily small-balance loan program is designed to enable liquidity, stability and certainty of execution in the country’s affordable-rental-housing marketplace. Applicable properties include conventional multifamily housing of five units or more with 90% or more occupancy, including properties with tax abatements and Section 8 vouchers. Notable components of the program include full-term interest-only options, low interest rates, non-recourse, 80% loan-to-value and flexible pre-payment options. Competitive pricing and streamlined loan processes are also cornerstones of the new program.

David Brickman, EVP of Freddie Mac Multifamily, says, “Sabal Financial is a great seller/servicer addition for us. The firm was selected for its demonstrated expertise in commercial real estate, particularly in the small-balance finance market, as well as for its operational efficiency.”

Stay tuned for an in-depth interview with Pat Jackson on the current state of the multifamily lending market.

Freddie Mac Expands Roster for Small Loan Programme

Thomson Reuters

Thomson Reuters, Joy Wiltermuth - January 06,2015

Freddie Mac took another step closer Tuesday to its first-ever securitization backed by small multi-family loans, after adding Sabal Financial Group to its short list of approved lenders.

Freddie has doubled the number of originators to six on its three-month-old Small Balance Loan program, aimed at boosting affordable rental housing in the US and providing more liquidity to smaller rental property owners.

While it’s unclear how many loans the agency has bought so far, a spokesman said Freddie may be in a position to launch an inaugural bond deal from the series, of about US$100m in size, in the second quarter.

Arbor Commercial Mortgage, Greystone Servicing Corporation and Hunt Mortgage Group were the initial trio of lenders approved back in October.

Not-for-profit Community Preservation Corporation, which traces its roots to tackling housing blight in New York City in the early 1970s, and ReadyCap Commercial, a lender backed by hedge fund Waterfall Asset Management, joined shortly after.

“We made it a point of being very active in early discussions with Freddie as it developed the Small Balance Loan program,” said Greystone’s Rick Wolf, a senior managing director working on the initiative.

Greystone closed its first two transactions under the Freddie program in December. At just over US$4.6m, the loans refinanced smaller rental properties in Los Angeles, and the lender is looking to originate more loans including in other key US markets where it already has a footprint, such as Boston, New York and Washington.

“You can chase the market as dumb money would, but Freddie is not out there doing that,” Wolf said. “It is not exceeding the market just to get deals done.”

Pros and cons

Freddie is buying loans of between US$1m–$5m on properties that have as few as five rental units. Terms include up to 80% loan-to-value with underwriting constraints that are highly competitive with those of banks.

“Lenders are lining up like store-shoppers for holiday sales to get approved by Freddie Mac,” said Randy Fuchs, co-founder of Boxwood Means, a research and consulting firm focused on the small-balance sector.

Among its draws are an agency backstop for its Triple A rated securities, lower financing rates for borrowers and a clearly-defined credit box that brings more certainty to the loan closure process, market players said.

And more accessible financing could potentially propel the value of smaller apartment buildings that have lagged widespread appreciation in the past couple of years.

Apartment prices across the US have jumped 16% year-over-year through December, and by 33% over the last two years according to the Moody’s/RCA Commercial Property Price Index.

Boxwood’s Small Multifamily Price Index, however, showed a much smaller 9% year-over-year increase and a 19% rise over the last two years.

Freddie hopes to complete US$500m–$1bn in securitizations from the series in 2015, depending on how many loans it can buy.

That may be capped by the number of Mom and Pop real-estate owners who qualify for the Freddie program, particularly since Section 8 and other rent-subsidized properties routinely breach housing regulations. That can damper a building’s financing options.

“A common violation in New York City actually is front doorbells,” a lender in the sector said, referring to older properties.

“If you can’t get new wiring up to each apartment because the building was built ages ago, you won’t be able to clear the violation.”

Selling on the risk

A new securitization on the back of the small loan program would be similar to Freddie’s existing multifamily CMBS K-deal series, which sells the first-loss slice of risk to private capital investors, called B-piece buyers.

The main difference will be the lower-quality assets that the small balance loan securitization program is targeting.

The B-piece in the K-series is offloaded to private investors at the time the Triple A notes are syndicated, whereas the small balance platform requires the loan seller to keep that risky slice of securities, at least initially.

At first the small balance program is expected to include only one lender that contributes loans to a single transaction, but a mix of mortgages from multiple lenders is a possibility further down the road.

Wolf said he expects Greystone to ink enough loans to lead its first deal in the series before the second quarter ends.

Banks Make Progress Freeing Selves from FDIC Loss- Shar...

American Banker

American Banker, Chris Cumming - January 02,2015

Regulators and failed-bank buyers are finally managing to negotiate an end to loss-share agreements inked during the financial crisis.

Banks and the Federal Deposit Insurance Corp. have infrequently agreed on early ends to their loss-sharing deals, but that may be changing. Bank of the Ozarks, one of the most prolific failed-bank buyers, reached an agreement last month with the FDIC to terminate all seven of its outstanding loss-share agreements.

That agreement is the most significant early-termination accord so far, and it could be an ice-breaker for other banks eager to exit similar loss-share deals.

“I think everybody, large and small, will be looking at the Bank of the Ozarks deal, and there will be a lot of focus on the precedent it sets,” said Walt Moeling, a lawyer at Bryan Cave.

When the FDIC seizes and sells a failed bank, it agrees to reimburse the buyer for a portion of the failed bank’s loan losses, usually for five years. Such loss-sharing agreements make acquiring failed banks a viable strategy for buyers, by reducing exposure to problematic assets.

These arrangements also have drawbacks. They involve complex accounting and, over time, amortization of the indemnification asset tied to the pacts can reduce a bank’s noninterest income.

The administrative requirements, including collection efforts, can be particularly burdensome. As a result, banks are often keen on closing out the loss-share agreements as early as possible.

For some banks, loan losses – and hence payments from the FDIC — have been lower than expected, while loss-share bookkeeping and reporting costs have been higher. From the FDIC’s perspective, too, administrative costs can make early termination appealing.

Even when both sides are willing to consider an early end to such deals, negotiations have proven difficult, due largely to accounting challenges like the uncertainty of estimating future losses.

So far, most early termination agreements have been with smaller banks with relatively small pools of loss-share loans. The FDIC’s policy has been to approach those banks about closing out loss-share agreements to reduce the banks’ administrative burden, an FDIC spokesman said. To be eligible for early termination, a loan balance covered by the agreement must be $50 million or less, and the FDIC’s total payment cannot be more than $10 million, the agency said.

The FDIC has closed 51 loss-share agreements with 20 separate banks, the spokesman said.

Most industry observers consider loss-sharing a policy success, as well as a huge boon for failed-bank buyers, because it helped reduce the economic damage from failures. The deals also gave failed-bank buyers incentive to work through the foreclosed property left by shuttered banks.

Loss-sharing’s utility as a public policy may explain why the FDIC has not been eager to end the agreements early, said Pat Jackson, chief executive of Sabal Financial Group, a California distressed-debt specialist.

“There’s been a real reluctance to have a discussion about early termination, and part of the reason is that the FDIC is expecting banks to help with the recoveries,” Jackson said. “The advantages that loss-sharing brought to banks were pretty compelling, and part of the bargain was they were going to do their part.”

Some bigger banks, like the $20.5 billion-asset EverBank Financial in Jacksonville, Fla., have managed to strike deals with the FDIC, but most negotiations get stuck before completion, industry observers say.

That was the case with Home BancShares’ efforts to reach an early end to its loss-share for a 2010 failed-bank deal. The Conway, Ark., company had trouble coming to terms with the FDIC, and Chief Executive Randy Sims told analysts in October that the deal was in limbo, though not yet dead. Home did not respond to a request for further comment.

“It was really important to us to get [the agreement] done in the third quarter, and things have dragged on and dragged on,” Sims said during the quarterly earnings call. “If we don’t hear something pretty soon … it’s not going to be as attractive as it once was.”

As the time period covered by loss-shares reaches an end, the FDIC’s incentive for winding them up increases, which may make it more eager to negotiate, Jackson said.

The FDIC serves as the receiver for the failed bank as long as the loss-share is open, which generates administrative costs for the agency and delays repayment for the parties owed money by the failed bank.

When nearly all the loans have been worked out, the FDIC may by more inclined to wind down the process, Jackson said.

“There’s a benefit to both parties to terminate early when there’s not a lot of dollars left in the loss-share,” he added. “As long as that receivership is open, it’s costing the FDIC money, and there is a whole line of people waiting to get paid.”

Other factors could encourage banks and the FDIC to come to the table. As the economy improves and bad loans turn good, some loss-sharing agreements may become irrelevant. Also, banks now have more experience working through the loans, so they can better estimate the dollar value of a portfolio of covered loans.

These factors may have helped Bank of the Ozarks close out its loss-share agreements, said Brian Zabora, an analyst at Keefe, Bruyette & Woods. Zabora said he expects the agreements to improve the Little Rock, Ark., company’s earnings, even without taking possible cost savings into account.

“Now that we’re getting close to the end of these agreements, I think Ozarks had a better handle on the credits and on what its losses will be,” Zabora said. “They’ve had the loans for so long now that there’s less uncertainty.”

Bank of the Ozarks said that, following the early termination agreements, it would reclassify $27.9 million of FDIC-covered loans as non-covered foreclosed loans. The company also said it would wipe a $36.6 million receivable from the FDIC and $26.7 million payable to the agency off its books.

Bank of the Ozarks did not disclose what payments, if any, it exchanged with the FDIC to terminate its agreements, though the company said it expects to record a gain on the exchange. A company spokeswoman declined to provide further details, though she said management may do so as part of its fourth-quarter earnings release.

Like other banks that have ended their loss-share deals early, the $6.6 billion-asset Ozarks could see a reduction in its administrative burden. Ozarks could also gain flexibility to dispose of assets in ways that would be more difficult under a loss-share agreement, like auctions and bulk sales, Zabora said.

Aside from considerations of profit and loss, ending the loss-shares could reduce a headache for management. Dealing with the complexity of loss sharing eats up a lot of a banker’s energy, Moeling said.

“The cost of maintaining the relationship with the FDIC is so great that, even if you have to come out a little bit behind on the financial terms of the exchange, you can win just by freeing up management’s time,” he said.

New Hire Helps Sabal Evolve Tech Platform, Carrie Rossenfeld - November 11,2014

NEWPORT BEACH, CA—Sabal Financial Group LP has hired Matthew Stoehr as chief information officer, based in the firm’s local office. Stoehr, who brings 20 years of experience in technology and real estate to the firm’s IT division, previously served in high-level technology positions at Compellon Inc. and Caruso Affiliated; he will oversee Sabal’s technology planning, network infrastructure and communications network.

The hire comes at a time of increased technology innovation in Sabal’s lending business, having recently announced its commercial real estate term lending division, which employs a proprietary technology platform called SNAP (Secure Next-Gen Application Process) to generate live quotes on loans of $1 million to $10 million for stabilized properties nationwide. caught up with Pat Jackson, founder and CEO of Sabal, to discuss what Stoehr’s areas of focus mean to the firm, why now was the right time for this hire and the company’s plans for future growth. What do technology planning, network infrastructure and your communications network mean to Sabal?

Jackson: When we started the company, we said it’s great to have real estate expertise, but we have to do it to scale. Technology is a huge part of our success to date, and our team continues to build. Matt thinks strategically, and he will help evolve our technology platform to keep up in the marketplace and where we’re going. It’s all interrelated around the parts of our business. Why was now the time to make this hire?

Jackson: We continue to add staff in the technology area. The company is in its sixth year, coming up on our seventh, and much of our business initially was on distressed debt and advisory services—and we’ve done a good job there. But now we have three lending companies expanding that area of the business. We’re doing a lot more work for banks, and we continue to be ahead of the curve as far as technology. This is an appropriate time to add this role, to really act strategically rather than tactically.

We have to keep the lights running and continue to stay current in what we’re doing, but we want to take a much bigger leap forward as the market evolves. Simply coming out with a lending platform the same way it’s been done for the last two decades is not something we wanted to do. The SNAP system is a fully integrated technology of front-end internal systems running together in a seamless way. It’s a way to differentiate ourselves in the market going forward. By working with the banks, we see this as the wave of the future. Many of them feel it’s better to outsource than not, so why not go with the very best in class while still being able to operate in a regulatory environment? What are your plans for future growth?

Jackson: We’ve been continuing to grow in the principal-investment space, and there’s still a lot of opportunity there. We’re spending dollars on our new businesses, taking a more normalized view in the market. There’s still a lot invested in real estate—that’s not being deemphasized—and we can lever that to build out our new businesses. We launched our term lending program mid-year, and our latest business has taken off in more than a satisfactory way. The technology demonstrates that we’re different.

We’ll be coming out with other lending programs later, but we’re very cautious about coming out with too many different things at once. We want to do it really well, not in a diluted way. Because of our platform, it gives us the opportunity to add additional products, and we will be making an announcement soon about product we will be rolling out through SNAP. We’re very excited about that. It’s the natural evolution of where we’re going in the term-lending space. We need to be perceived as market leaders in the $1-million to $10-million space—that’s important to us.

4 Basics for Scaling Your Business With Web-Based Techn...

Entrepreneur Magazine

Entrepreneur Magazine, Pat Jackson - August 14,2014

There are many types of businesses and many ways to grow them. Smart staffing, aggressive business development, strategic partnerships, investor relations and many other functions all contribute. But to grow from a small to a large company, you have to be able to both drive distinctiveness in your business model and to create efficiency and scale.

Setting your company apart from the competition will help attract customers, investors and employees, while driving leads, profitability and growth. Efficiency and scale are also paramount to expanding profit margins. Both are needed for handing an expansive client load. While many factors play into differentiating your business and achieving superb efficiency and scalable operations, there is one thing that greatly contributes to all – technology.

But what technology should be utilized and when?

1. Web-based platforms for round-the-clock access to your customer. Web-based technology platforms are ideal for a number of business solutions. They are logical. Our constant use of smart phones and tablets is not only a way of life phenomenon, but also represents a powerful and direct means to reach and influence your customer around the clock. Equally important, Web-based platforms allow your customers to reach you.

2. Common ways to improve business efficacy with Web technology. Programs built for the Internet environment are well-suited for client facing interactions, as well as for the aggregation and processing all kinds of information. Most businesses require applications and forms to be completed by customers, and Web-based programs give clients 24/7 access and efficient ways to complete them.

Web platforms also compile large amounts of data into central databases and provide multiple ways for deciphering, organizing and evaluating that information. Not only do these benefits improve speed in your operations, they also enable scale (your ability to exponentially increase the amount of business you are able to conduct).

Common applications of Web-based interfaces include credit card entry forms, CRM entries and databases, investor reporting tools and customer service interfaces, among countless others. But the real power of these interfaces is when they are utilized to create new, unique business processes, pushing slow adopter companies (and even whole industries) to evolve and improve the ways business is conducted.

3. Technology platforms that differentiate your business model and create scale. Once you identify how competitors utilize technology, you may formulate a unique strategy for maximizing efficiency within your own business. Look for ways to employ and combine technology processes to differentiate and create a unique business model. Assume you are able to create custom technology platforms, because you can. Web technologies include “off the shelf” solutions for common functions, custom-built tools for individual business challenges, and the combination of both which allows for truly unique solutions.

4. Integrate technology into your brand. Once you have embraced cutting-edge technology and implemented it into your organization, make sure your corporate brand reflects that. If your technology solutions better the current industry standards for conducting business, strengthen your brand with it to attract customers and superior talent, as well as to align your employees and partners with your goals and values.

The Rush to Lend – Opportunities and Challenges in a ...

WIB Lending & Credit Digest

WIB Lending & Credit Digest, Vartan Derbedrossian - July 01,2014

The residential real estate recovery is continuing at a steady pace in the U.S. As a result, the for-sale housing market is on an uptick. Employment has improved, interest rates remain lower and more buyers in both the first-time and move-up demographics are actively looking to purchase homes.

The U.S. Department of Housing and Urban Development and the U.S. Census Bureau recently reported the sale of newly built, single-family homes rose 18.6 percent to a seasonally adjusted rate of 504,000 units in May – the highest rate since May 2008. The National Association of Home Builders reported single-family permits increased at almost 4 percent, evidence that builders expect continued release of pent-up demand and an expansion of the housing market.

Single-family homes are not the only type currently being sought. Demand to both build and buy condominiums and townhomes is also spiking. In 2013, builders broke ground on 22,000 for-sale multifamily residences, a 4.8 percent increase from 2012 and a 47 percent increase from the lowest point post-crash in 2010, per U.S. Census Bureau data. The Bureau also reported that in the first quarter of 2014, 8.5 percent of the 71,000 multifamily units that started construction were built as for-sale properties, up from a 6.9 percent share a year earlier.

These factors, along with a recent multiple-year stall on new home construction projects, demonstrate tremendous demand among builders for new home community construction finance. With many community banks having left the construction finance space during the crisis, reputable builders across the country are faced with a lack of capital to build the homes that so many buyers want. As a result, there simply isn’t a lot of new product out there, but the demand is high for it.

In light of this, many banks are now asking, “Given our real-world challenges, such as limited staffing and regulatory pressures, how can we capitalize on this lending opportunity quickly to access attractive yields?”

Banks understand that construction finance is a profitable product. Once the hurdles of getting a finance platform off the ground are addressed, the yields are extremely attractive.

To capitalize on this market opportunity, some banks may choose to establish an in-house construction finance business. To do this, these institutions will need to address a handful of variables – intellectual capital, capital to lend, cost efficiencies, as well as the proper systems and workflows which provide the speed to finance solutions that builders require. As a result, for some, the barrier to entry may be too high and too costly.

To eliminate the in-house burden, many banks are looking to outsource lending operations to a specialist in lending and real estate. With construction finance experts already engaged and operating similar programs for other financial institutions, or for their own accord, ramp-up time is dramatically reduced due to the elimination of recruitment, staffing and training for the loan administration, fund control and credit sides of the operation.

Additionally, this solution offers in-place systems, workflows and regional market knowledge and expertise. A well-selected third party will also handle oversight of the regulatory constraints the institution would normally be challenged with, both from a cost and staffing standpoint. Regulators may also be more apt to have reduced concerns with a third party, if that expert is operating on robust, established systems and procedures, as compared to a bank with a newly formed platform.

And, very importantly, an outsource solution is able to provide the cost efficiencies that a bank with a newly established construction finance platform will be challenged to achieve for a (likely) significant period of time. Construction finance is extremely expensive on a per-loan basis, until a certain loan volume is reached; a properly-selected third-party provider should already have reached this threshold and offer variable cost savings.

Construction finance is in demand. Banks that recognize the profit opportunity with this type of finance should look to capitalize on it. Regardless of whether a bank chooses to create an in-house or outsource platform, they should always consider variable cost and how best to achieve per loan administrative related savings as quickly as possible to enhance yields. More importantly, they should understand that whatever their challenges to entering, or re-entering the business, it is possible and the time is ripe.

Sabal Creates CRE Term Lending Product, Rayna Katz - June 13,2014

NEWPORT BEACH, CA—Sabal Financial Group has expanded into commercial real estate term lending. Using its own technology, the firm has created new project and division to serve applicants for small to mid-sized loans.

“Historically, many loan applicants have faced extended periods of uncertainty throughout a lengthy financing process,” explains Len Israel, director of CRE term lending. “Our new platform is focused on providing superior service and our technology accelerates the process.”

The new program, called SNAP, provides a web-based, security-controlled interface where brokers and their borrowers can efficiently go through the loan process with access to real-time interest rates, loan tracking tools and closing checklists. Designed with the unique needs of brokers in mind, SNAP can be accessed through the Sabal Financial website or a direct link portal. Once registered, SNAP greatly increases transparency for brokers working to get their loans approved by providing status updates and access to crucial loan process information.

Sabal Financial’s CRE Term Lending division will leverage the company’s experience with its existing lending platforms and skilled team of commercial real estate investor professionals. The group offers term loans from $1 million to $10 million for a wide range of commercial property types through an exclusive broker-driven network.

“From day one, innovation has been a key to Sabal’s success, bringing expertise and efficiency to the real estate and financial marketplace,” asserts Pat Jackson, CEO and founder of Sabal Financial. “Sabal continually finds ways to reinvent traditional processes through the use of technology and the launch of our CRE term lending division and development of SNAP are important steps in accomplishing this mission. We believe SNAP will be embraced by brokers seeking an improved way to transact commercial real estate loans.”

To learn more about what’s on Pat Jackson’s mind, click here.