The Encyclopedia of Commercial Real Estate Advice

CHAPTER 11Taking Charge of Your Commercial Loan

“Is there anything you can do to help me?” Richard asked me in desperation. He went on, “Two months ago I got a letter of interest from the bank promising me a 75% loan to cost construction loan, and yesterday I got a commitment letter from them for 60%. That leaves me $600,000 short. I've been a customer of theirs for years and have never missed a loan payment. They told me that management was not excited about doing a 55 and older project, which they thought was too risky. They loved the deal when I applied. I have already pulled permits. I'm ready to break ground next week—my subs are ready to start. I don't want to lose them. How can they do this to me?”

It was October of 2014. Richard was the developer and general contractor for a 40-unit senior multifamily construction project in Coeur d'Alene, Idaho. “It's just that they can do this to you,” I answered. “You have to understand that the bank will always protect itself when it comes to the regulators.”

As a mortgage-banking firm, my company was a member of the Idaho Bankers Association. Banks often refer loans that they cannot do to us to save the deposit relationship, since we do not take deposits.

“I know this bank,” I went on to say. “They have concentration problems with the FDIC regulators. Their ratio of commercial loans to their liquidity is too high. So, if they take any more on, they are only going to cherry-pick the best. The loan officer that you have been working ...