Opening: “I’m Laura Munoz and welcome to Let’s Talk Commercial Real Estate a newly created video blog covering topics of interest for commercial brokers and borrowers, sponsored by American Life Financial.
Laura Munoz: “Hi, I’m Laura Munoz and welcome back to Let’s Talk Commercial Real Estate. Today we have the chief underwriter of American Life Financial, Anthony Turdo. Anthony, welcome to the show.”
Anthony Turdo: “Thank you haha.”
Laura Munoz: “So, one of the things that our viewers have asked is: what does a chief underwriter do?”
Anthony Turdo: “Well, the main task of a chief underwriter is to assess risk. There are two types of underwriting: 1. is for conventional bank and SBA underwriting, which is your most difficult bank loan and then private money and hard money underwriting, which is a little bit different. In conventional bank and SBA lending, the underwriting is basically a task check list.”
Laura Munoz: “Okay.”
Anthony Turdo: “Right and what they do is they have this underwriting criteria and they will see if the loan fits the that underwriting criteria. For example, debt service ratio, typically they require a debt service ratio of 1.25 and if it meets that criteria they will check mark that. They will look at vacancy ratios. If the vacancy is low enough, they will check mark that. They will look at FICO scores, if the credit score if the borrower is high enough, then they will say ok we can do this loan and will check that off. They will also look the property, the condition, age, use of property, type of property, [and] see if it meets their parameters and if it does & everything checks in their check list, then they fit in that little box and they can make that loan for the borrower. But if something doesn’t check out, they decline the loan.
Laura Munoz: “Okay.”
Anthony Turdo: “Now for a hard money underwriter, we too have a checklist with criteria but our criteria is more flexible- so our box is a lot bigger. For example, one of the criteria is the debt service ratio needs to be 1.1 minimum but we have done many loans where the debt service ratio is less than 1. Either because their loan to value was low enough to justify the loan or because the borrower had money from other sources that could compensate for that lack of debt service ratio. Also vacancy, we have lend to properties that have high vacancy because we look at the market and say it makes sense that this property is gonna have tenants in the future.”
Laura Munoz: “Okay.”
Anthony Turdo: “FICO scores- we don’t even care about FICO scores. So credit scores we don’t look at. We have lend to people with bankruptcy, foreclosures, with judgements- we can underwrite not based on a specific criteria but based on what makes sense.”
Laura Munoz: “So that’s how the Not So Hard Money loan came into invention?”
Anthony Turdo: “Correct.”
Laura Munoz: “Easier criteria?”
Anthony Turdo: “Easier criteria- easier to qualify for a loan then when you’re conventional mortgages (???)
Laura Munoz: “So does that make your job a little easier?”
Anthony Turdo: “It actually makes it more complicated. Even though the criteria is easier, one of the major differences is having an underwriter that has the knowledge and has the experience. If you deal with an underwriter that is unexperienced, they will find what the problems are, [and] what the issues are with the loan and the client based them on those problems and issues. An underwriter that has experience, will look at those same issues and say what can we do to fix it- what can we do in order to compensate for those issues and problems so we can still make the loan. So I have helped many borrowers either fix title issues, fix ownership issues, fix issues within their entities so they can qualify for our loans and at the same time it paves the way for them to qualify in the future for a more conventional bank loan, which is the end goal of most of our borrowers.”
Laura Munoz: “Have topics or questions you’d like covered on let’s talk commercial real estate? Or if you’d like to be a guest on let’s talk commercial real estate, please contact us.
Great Underwriters Think Out of the Box
Anthony Turdo, Chief Underwriter at American Life Financial, shares with our viewers exactly what a chief underwriter does and how important it is to the loan process. He explains how an experience underwriter can make suggestions to the borrower to get a loan approved.