Wells Fa rgo Business Real Es ta te F inancing
Referral
Program for Mortgage Brokers
B R O K E R T R AINING AND R E F E R E N C E MANUAL
Introduction Product Overview
Competitive Fees and Rates Quick Qualifying Checklist The Loan Process
How the Broker is Paid
Requirements for Participating and Wells Fargo Contact Information
Appendix I: Sample Rate Sheet
Appendix II: Underwriting Guidelines Appendix III: Equity Terminology Appendix IV: Finding Leads
Page 3 Page 4 Page 6 Page 8 Page 9 Page 11 Page 12 Page 13 Page 14 Page 18 Page 19 TA BL E OF C O N T E N T S
First of all, Wells Fargo Business Real Estate Financing wants to thank you for participating in this unique program for mortgage brokers. Wells Fargo Express Equity and Wells Fargo Express Refi represent a significant departure from traditional commercial real estate financing. They truly are “Commercial Real Estate Financing Made Simple.”
W HY IS E X P R ESS EQUI TY IM POR T AN T TO YOU?
o It’s a whole new commercial lending income stream that complements your existing home mortgage income.
o Commercial real estate lending is driven by individual business needs, NOT the trends of the residential real estate market.
o It’s an easy addition to your portfolio: Many of your current home mortgage customers own commercial real estate as small business owners or investors.
o You don’t need to be a commercial loan expert. Our turnkey program makes it easy to explore the commercial real estate field with no previous experience!
o The only thing you need to do is to complete and submit the application for your borrower.
CUSTOM ER COMMEN TS
“Wells Fargo Express Equity was cheap and fast. There were no upfront costs, so I saved thousands. At every step, the people I dealt with were ready to roll...” — James Struck, The Struck Firm
“Wow. This is what I was waiting for. Very straightforward, a simple application, no catches... this is it.” — Julie Hayden, CB Plumbing “Fabulous! Fast and efficient, everything was handled over the phone and via fax. You guys were great!” — Jack Daniels, Cal West Holdings
Wells Fa r g o B usi n ess R eal Es t a t e Fi n a nci n g
I N T R O D U C T I O NW E L LS F ARGO E X P R ESS EQUI TY
& E X P R ESS R E F I — P RODUCT OV ERVI E W
Target
o Tailored for commercial, residential or investment real estate
o Owner-occupied and investment properties
o Widest eligibility of property types; even some environmental risks are eligible
Product
o Loan or line amount: From $25,000 to $500,000
o Secured by commercial real estate up to $2 million in value o Equity or Refinance ("Express Equity" or "Express Refi") o Loans or evergreen (no need to re-qualify each year) o 1st or 2nd lien position
o Fixed or adjustable rates
o Lowest combination of rate and fee (APR) in the market
Underwriting
o Credit scored; risk-based pricing and risk-based LTV o Credit approval decision typically in three days
Process
o Easy, one-page application
o Stated income (Some investor exceptions may require minimal documentation)
o Streamlined process – savings passed to customer
o Centralized Loan Center navigates the paperwork for the brokers
Customer Satisfaction
o Consistently over 90% * As permitted by state law.
COMP AR E E X PR ESS EQUI TY & R EF I
TO TR A D I T IONAL COMMERCI AL R E A L E S T A T E LO ANS
WELLS FARGO EXPRESS EQUITY AND REFI
TYPICAL BUSINESS LOANS USING REAL ESTATE COLLATERAL
P R O P E R T Y
VAL UA T I O N Free Internal Valuation performed by Wells Fargo – At no cost to the borrower
Full MAI appraisal required, which could cost as much as $5,000
APPLICATION FORM
Just one page. Stated income (Investors may be required to produce additional documentation)
As long as 10 pages, often requiring three years of financial statements and two to three years of personal financial records
CLOSING COSTS AND LOAN FEES
One time origination fee of just 1% of credit amount (Environmentally sensitive properties required to provide insurance at their own
expense; Mortgage filing tax fee is responsibility of applicant in states where applicable.)
1-2% of the credit amount plus fees for title insurance, recording fees, attorney fees,
environmental assessment and other fees. Usually $7,000 or more
DECISION TURNAROUND
Typically within three business days
Often up to three weeks
ELIGIBLE
PROPERTY TYPES
Most property types with value up to $2 million
Strictly limited to office or retail or some limited specialization LI E N P O S I T I O N First or second mortgage First mortgage only
CLOSING F E E S o Minimal fees
• No appraisal fee, no title fee, no application fee
• No cost to customer if deal does not close
• A single 1% origination fee is charged at the close of the loan
• Approved environmental property: one-time additional fee (at close) of $400-$1,200
HOW OUR F E E S COMP AR E TO T H E COMP E T I T ION ON A $200 ,00 0 L IN E OR LOAN
TYPICAL SERVICES COMPETITOR FEES WELLS FARGO FEES APPRAISAL FEE $4,285 TITLE INSURANCE 1,255 UNDERWRITING FEE AND FLOOD CERTIFICATE
800
CREDIT REPORT 155
SETTLEMENT OR CLOSING FEE (1%) $2,000 $2,000
DOC PREP FEE 175
OTHER FEES (LEGAL, RECORDING, TAX)
329 Mortgage filing tax fee in
states where applicable — borrower pays
ENVIRONMENTAL INSPECTION FEE (IF REQUIRED) 4,000 + ENVIRONMENTAL INSURANCE (IF REQUIRED) $400 – $1,200 TOTAL $12,999 $2,000 +
SAVE $5000 or more with Wells Fargo Business Real Estate Financing! C O M P E T I T I V E F E E S A N D R A T E S
F E ES DURING T H E L IF E OF T H E LO AN OR LIN E o Annual line-of-credit fees:
LINE AMOUNT ANNUAL FEE
Up to and including $50,000 $150 Up to and including $100,000 $250 Up to and including $250,000 $500 Up to and including $300,000 $625 Up to and including $350,000 $750 Up to and including $400,000 $875 Up to and including $450,000 $1000 Up to and including $500,000 $1125
• Waived with significant usage over the past 12 months o Prepayment fees (fixed loans)
• 1% in Year 5 or later
• 2% in Years 3-4
• 3% in Years 1-2
• Waived if replaced with another Express Refi loan
• Hard prepayment fee: not waived with sale of property o Early closure fees on lines and adjustable loans
• $750 if closed within first three years. No fee after Year 3
• Reduced fee if moved into another BREF loan or line
RA T E OV ERVI E W AN D A PR GUARAN T E E
o Best combination of rate and fee in the market, guaranteed. We will match a comparable competitive offer or pay $200
o Rate depends on term, credit, loan amount, lien position, adjustable vs. fixed
o Rates are quoted at time of approval and are locked in o See sample rate sheet in Appendix I
QUICK QUALIFYING CH E CKLIS T
Answer to these questions should be “yes”:
o Is the property valued at $2 million or less?
o Is the loan or line of credit amount $25,000 – $500,000? o Has the customer owned the property more than one year? o Has the customer been in this business more than two years? o Does the customer have a credit score of 680 or above (may go as
low as 660 if a current Wells Fargo customer)
o Is the borrower’s annual income more than $50,000?
o Does the real estate securing the loan meet eligible property guidelines? (See Appendix II for Guidelines)
o Is the LTV within the LTV-by-property type guidelines (Appendix II) ? o Is the application complete and accurate?
• Annual sales and household income is complete/reasonable
• Property value is a reasonable estimate
• Owner-occupied % appears accurate
• All acknowledged liens are noted
HOW T H E BR E F LOAN C EN T E R H AN D L E S EV ERY T H ING FOR YOU
LOAN OFFICER
BREF LOAN CTR.
Review qualifying checklist
Application Submit Receive
Submit property insurance information (optional)
Submit mortgage statements (optional)
Submit rent roll, if investor apt/office (or condo bylaws, if office condo)
(optional)
Call customer for missing/additional information
Pull credit and underwrite
Make offer to customer/decline
Order and process title, property valuation, environmental, payoff demands
Handle any issues/exceptions that arise
Docs
(Can be sent directly to borrower)
Receive Prepare/send
Arrange signing and return signed docs
Funding
The BREF Loan Center handles most things for you.
CONDI T IONS REQUES T E D BY BR EF LOA N C EN T ER A F T E R A P P IS SUBMI T T E D :
Most Common Stips (Conditions)
o Recent mortgage statement o Property insurance declaration
For Investor/Apartment Owner
o Rent roll
o Real Estate tax schedule — requested on an exception basis, when application does not initially appear to meet 1.2 Debt Service ratio.
Wells Fa r g o B usi n ess R eal Es t a t e Fi n a nci n g
TH E L O A N P R O C E S So Short environmental questionnaire o Copy of property tax bill
o Articles of incorporation; Schedule C; Partnership agreement o Trust agreement
o Grant Deed/Quit-Claim Deed/Death Certificate/Reconveyance Deed
Processing Timeline: Typically 45-60 days for clean deals
o Possible delays may add 2 –4 weeks
• Undisclosed liens
• Low appraisals
• Private party payoffs
• Communication problems
HOW T H E BROKER IS P A I D
o BREF Loan Center sends check request to Wells Fargo Accounts Payable to pay broker referral fee
• Application should always include parent broker ID and mailing address
• W-9 must be filled out and faxed to BREF prior to first application (We need the brokerage’s tax information, not the individual loan officer’s)
Sample broker compensation calculation, assuming:
o Loan: $200,000 o Line: $200,000
LOAN EXAMPLE BROKER COMP
$200,000 Loan (50 bps) $1000
LINE EXAMPLE BROKER COMP
Requirements for Participating and Wells Fargo Contact Information:
o Attend this training.
o Submit the Broker Agreement. This will be emailed to the attendee following this training. It must be signed by an officer of the brokerage. Fax back to 1-888-371-1045.
o Complete and fax W-9 along with broker agreement.
More information can be found at:
o https://ilnet.wellsfargo.com/ildocs/ee
o Scenario questions: Call Bobbi Butler at 1-602-523-1805 or Lisa Lankford at 1-602-523-1929
o Program and scenario questions: Email Angie Birdwell at
angie.h.birdwell@wellsfargo.com
o Rate Sheet updates to be mailed out to Account Executives weekly. Or request from angie.h.birdwell@wellsfargo.com.
Interest Rate Guide: effective 7/11/2005
FICO RANGE: 710 - 770 675 to 709 630-674
Fixed: 5 yr loan - 5 yr amortization 7.55% 8.29% 8.91%
Fixed: 7 yr loan - 7 yr amortization 7.59% 8.34% 8.96%
Fixed: 10 yr loan - 10 yr amortization 7.69% 8.44% 9.06%
Fixed: 10 yr loan - 25 yr amortization 7.80% 8.54% 9.16%
Fixed: 15 yr loan - 15 yr amortization 7.77% 8.53% 9.15% 7.70% 8.19% 8.81%
Adjustable: 10, 15, 25 Year Loan 7.58% 8.09% 8.71% 1.50% 2.75% 3.25%
Fixed: 5 yr loan - 5 yr amortization 7.24% 7.97% 8.58%
Fixed: 7 yr loan - 7 yr amortization 7.34% 8.08% 8.69%
Fixed: 10 yr loan - 10 yr amortization 7.52% 8.25% 8.86%
Fixed: 10 yr loan - 25 yr amortization 7.70% 8.45% 9.06%
Fixed: 15 yr loan - 15 yr amortization 7.69% 8.43% 9.04% 7.43% 7.91% 8.52%
Adjustable: 10, 15, 25 Year Loan 7.52% 8.01% 8.62% 1.25% 2.50% 3.00%
Fixed: 5 yr loan - 5 yr amortization 6.97% 7.71% 8.33%
Fixed: 7 yr loan - 7 yr amortization 7.12% 7.86% 8.48%
Fixed: 10 yr loan - 10 yr amortization 7.32% 8.05% 8.66%
Fixed: 10 yr loan - 25 yr amortization 7.50% 8.24% 8.85%
Fixed: 15 yr loan - 15 yr amortization 7.48% 8.21% 8.82% 7.17% 7.66% 8.28%
Adjustable: 10, 15, 25 Year Loan 7.32% 7.80% 8.41% 1.00% 2.25% 2.75%
Fixed: 5 yr loan - 5 yr amortization 6.52% 7.26% 7.88%
Fixed: 7 yr loan - 7 yr amortization 6.67% 7.41% 8.03%
Fixed: 10 yr loan - 10 yr amortization 6.87% 7.60% 8.21%
Fixed: 10 yr loan - 25 yr amortization 7.05% 7.79% 8.40%
Fixed: 15 yr loan - 15 yr amortization 7.03% 7.76% 8.37% 6.72% 7.21% 7.83%
Adjustable: 10, 15, 25 Year Loan 6.87% 7.35% 7.96% 0.75% 2.00% 2.50% ** based on Wells Fargo Prime Rate
Example of Monthly Payment for a $100,000 Loan Rate Amortization Monthly Pmt 9.00% 15 years $ 1,014.27 9.50% 15 years $ 1,044.22 9.00% 25 years $ 839.20 9.50% 25 years $ 873.70
Business Real Estate Financing
1st Lien Position* Loan amount: $ 40,000 to $99,999
** Line of Credit - spread over prime Adjustable: 5 Year Loan
Adjustable: 5 Year Loan
** Line of Credit - spread over prime
PLEASE NOTE: Interest Rate varies depending on customer's overall creditworthness
Interest Rate (within 15 bp)
Wells Fargo Bank
For Scenarios, call 1 602 523-1929
Loan amount: $ 100,000 to $189,999
Loan Amount: $ 190,000 to $250,000
Lines of credit will not be approved below Prime
** Line of Credit - spread over prime Adjustable: 5 Year Loan
** Line of Credit - spread over prime
Loan Amount: over $ 250,000
Actual Rate Determined at Time of Approval
FOR A 2ND LIEN POSITION - ADD 50 bp TO ABOVE RATE
Express Equity and Refi loans/lines are underwritten using a complex set of risk factors. The most critical factors considered are:
o Guarantor’s credit rating o Property Type
o Available Equity o Cash Flow
While the actual underwriting guidelines are proprietary to the BREF program, the following guidelines will be helpful.
LOAN TO VALU E:
Risk based underwriting-approved LTV is dependent on applicant's credit and property type.
LTV/CLTV MATRIX
Risk based underwriting-approved LTV is dependent on applicant's credit and property type. POPULATION MIN & MAX LTV
(< = $250k) MAX LTV (> $250k) MINIMUM FICO Standard, Owner Occupied 70% - 80% 70% - 75% 660
Multi Use 70% - 80% 70% - 75% Same as Standard,
Owner Occupied Investor 65% - 75% 65% - 75% Customer: 660 Non-customer: 680 Apartment Buildings (5+ Units) 70% - 75% 70% - 75% Customer: 660 Non-customer: 680 Special Purpose Properties 60% 50% Customer: 660 Non-customer: 680 Residential (1-4 Units)
Refer to Standard, Owner Occupied or Investor depending on ownership
W ELL S FA R G O B U S I N E S S R E AL E S T A T E F I N A N C I N G U N D E R W R I T I N G G U I D EL I N E S A N D EL I G I B L E P R O P E R T Y T Y P E S
P ROP ER T Y E L IGIBILI TY :
Maximum property value: $2 million
All standard property types, and many non-traditional property types, are eligible for Express Equity and Express Refi commercial loan products, including:
o Office o Industrial o Warehouses o Retail o Mixed-use o Special Purpose o Multi-family (5+) residential* o Investment Properties
o Residential (1-4) has recently been added to the program* o Some environmentally risky properties (when insured by our
Environmental Insurance Program). *Requires HMDA disclosures
Most Common Eligible Special Purpose Properties (Max 50% LTV)
o Auto repair o Auto sales
o Gas Stations <10 yrs old* o Minimart
o Self-storage
o Fast Food Restaurant o Daycare or Preschool
o Convalescent Home
o Nursery (Horticulture)*
o Health Club or Gym
o Theatre
o Non-Profit Organizations
o Agricultural/Forestry/Orchards/Farms o Dry Cleaning Plants
o Chemical Plants
o Fertilizer Manufacturing o Government/Military o Time Share Properties
o Vacant/Undeveloped Land
o Mobile Home/RV Parks
o Auto Wrecking/Auto Salvage Yards o Gas Stations > 10 years old
o Hospitality (hotels, motels, B & B)
o Texas: Commercial property owners having a personal residence situated on, or adjacent to, the collateral property
ENVIRONMEN T A L PRO P E R T I ES
The current and past use of a property may influence its acceptability for a loan. Generally, the following current and past uses may raise a flag:
o Automotive
o Photo developer
o Gas station/fueling facility o Food Processing
o Commercial printer o Hospitals or laboratories
o Transportation (taxis, buses, trucking) o Winery
The owner of these and some other property types will be asked to fill out a environmental survey. Areas of particular concern include, but are not limited to:
o The presence of above ground or underground storage tanks either now or in the past
o The current or past presence or regulated substances at the site o Known environmental contamination at the site
An environmental loan insurance policy may be required before a loan can be accepted. Fees for Environmental Assessment and Protection Policies can range from just over $400 for a low risk property to $1200 for a high-risk property. (These are one-time costs.) These rates vary depending on the length and amount of the loan.
Wells Fargo Business Real Estate Financing professionals may use slightly different terminology when referring to available equity than what is used in residential mortgage brokerages. Here are some terms to be familiar with:
o LTV
• The term LTV is used interchangeably for LTV (on 1sts) and CLTV (on 2nds)
o Calculating LTV
• For Refi/1sts:
Maximum loan amount = (Property Value x Approved LTV)
Here are some tried-and-true methods for digging out those commercial loan opportunities:
o Look in your closed file drawers. Check the 1003 Schedule of
Properties Owned for business real estate, 5+ multi-family, and other investor properties.
o Look in newspaper ads and yellow pages for types of businesses that would be housed in Eligible Property Types listed in your training guide (multi-family, retail, mixed use, small office buildings, auto repair, minimart, self-storage, fast food, daycare or preschool, convalescent home, health club, gym, or theatre).
o Obtain lists from your local title company, as you might do for residential lead.
o Check in with your referral networks, particularly real estate agents, accountants and attorneys.
o Let your realtor contacts know that you have access to small commercial real estate financing.
o Many existing commercial loans are short-term and/or hard money loans. When making new commercial contacts, ask about the nature, term, and rate of their existing loans.
o Walk the streets of your community. Opportunities are everywhere.
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