Commercial mortgage loans can be complex and getting them closed and funded can be a challenge. And some loans are harder to close than others. No matter how difficult a given borrowers situation is, one of the biggest mistakes a borrower can make is to “misrepresent” the truth about their situation on their commercial mortgage loan. And this includes borrowers is really difficult scenarios.
It is important for borrowers in tough spots (or really any borrowers) to realize that underwriters are there to verify and prove all components of the commercial mortgage loan. They are actively “policing” the loan and looking for fraud and or misrepresentation. That is there job. Their mentality is guilty until proven innocent.
Borrowers in a difficult situations that have perhaps been turned down from a few banks, learn what the banks didn’t like about their deal and sometimes make the mistake of “altering” their story in hopes that the issue will go undiscovered or that they will somehow outwit professional commercial loan underwriters.
Besides just being shady or simply dumb, this strategy is often a complete waste of time, energy and money for all involved and especially the borrower. Underwriters almost always discover the truth.
Keep in mind that the typical commercial mortgage loan process starts with an initial loan underwriting/review. After the major points of the loan are looked at and confirmed to be acceptable, banks issue a Letter of Intent or Term Sheet which spell out the details of terms of the proposed loan AND the require a good faith deposit to ensure that the borrower is committed to working with the bank. N This deposit will also be used to cover third party report later on. This deposit, which is normally between $5,000 -$10,000 or more is almost always refundable.
However, there is always language in the Letter of Intent explaining that one of the conditions to the deposit being refundable is that the borrower cannot misrepresent their situation. If the bank finds that the borrower has been hiding, leaving out or just plain lying their deposit will be forfeited and not refunded.
The better strategy for the borrower is to roll up their shirt sleeves and get to work. Find a list of say fifty or so banks and call all of them. Disclose all the facts of the commercial mortgage loan. It doesn’t have to be a sob story either, just give the facts. For example if your credit score is a 580 you don’t have to go into a long story about what happened unless asked. Once you find a bank that is interested you’ll have real chance of closing your commercial mortgage loan and not having it declined two months into process.
