Ever since Fannie Mae and Freddie Mac started attacking real estate investors I started learning a lot about portfolio lenders.
Honestly, portfolio lenders are not as easy to work with as I thought and as all the gurus out there will tell you. In fact the target you are aiming at is moving.
Like conventional loans, portfolio loan guidelines change frequently, in fact they change while you are in the middle of the loan process. This has happened to me on multiple occasions. Loans were approved but guidelines changed before closing and the loans were denied.
This is very frustrating for me and for the loan representatives and officers of the bank. So why is this happening?
Banks are still running scared. There is always a risk of default and smaller banks can’t absorb a loss like a larger national bank can. This makes them react more conservative than you might expect (sometimes over react and over compensate). Aside from default risk, banks are concerned about compliance. Banks are very highly regulated. They have to keep a certain amount of money in cash and have a certain mix of loans. If they start to get too heavy on a specify type of loan (like non owner occupied residential) they can make it hard to qualify for that type of loan OR they will just stop doing them. I had good relationships with two local banks and both said they needed to stop non owner occupied residential lending completely.
Another issue is different banks have different appetites for loans. If there is a specific loan you are looking for that only a community bank can do you may need to call 20 or more banks to find one that is interested in looking at it.
I still believe portfolio lenders are an essential asset to a successful real estate investor. Fannie Mae and Freddie Mac can only take you so far. They will not do certain loans and will limit you on the number of loans that you can do but you can often times find financing for these types of loans through banks.
They biggest key to portfolio lending is building a relationship with the bank through deposit accounts and build relationships with key people. If you can accomplish good enough rapport they will often do what they can to help you.
We are always looking for good local banks to build relationships with to help our clients be successful. If you have any success stories please share them with us.