As many readers know firsthand or may suspect, if they are not in the commercial loan business, commercial stated income loans are all but "extinct" due to the credit crisis. Surprisingly however, there are a few stated income lenders are still lending. They are portfolio lenders and are not tied to the commercial secondary market. They are still around and are still funding commercial stated income deals.
Instead of selling their debt off onto the secondary market, these commercial lenders originate, underwrite, than actual hold onto the debt and service the loan over the long term, the old fashion way. The norm for most stated income commercial lenders is that they would pool hundreds of loans together, and sell them for a fee on the secondary market aka Wall Street. The benefit for the lenders with this structure where many, like increased liquidity and lowered risk, in case of borrower default.
Now that the secondary market has become so beat up due to the greater economy and more specifically the residential subprime mess, this market is weak with few buyers. Bottomline, these lenders have been straddled with debt that they meant to sell and have not been able to, which has caused major cash flow issues. Think Lehman Brothers or Bayview.
Again the difference here is that one business model was set up to hold onto the loan long term, i.e. to portfolio the debt, while the other was to originate and sell the debt on the commercial secondary market. This market is all but dead. The latter is still functionary.
What can borrower expect as far as terms? 30 year amortization is still available with fixed rates between five years to ten years. Many special purpose properties are eligible and loan to values on cash out refinances can go up to 70%. Rates are of course higher than bank loans, currently approximately 100 to 300 basis points higher. Also, borrowers should be prepared to pay higher than normal prepayment penalties.
The primary benefit of commercial stated income loans is that the borrower does not have to provide tax returns and instead "states" their income. Credit scores need to be decent at 660 minimum to qualify. All in all, there are many benefits of commercial stated income loans for borrowers. The main one of course, is that the borrower gets a loan, when all other commercial real estate loan sources have passed.
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