By Anthony M. Gramza

In today's fast pace world, with new type of lending sources entering the marketplace, and with increase demand for new financing and refinancing of commercial properties and ventures, it is obvious that precautions must be taken not only to protect initial fees paid by the cli ent, but to insure a timely process from application to closing.

Let me now share with you some fundamental points in commercial mortgage financing.

1. ALWAYS ASK FOR REFERENCES

If you don't know the company you are dealing with, ask for references. These should include a banking reference [if it's not a bank]. Any company claiming the ability to directly fund commercial mortgages uses a bank or banks. Account officers at major banks won't give you a lot of information, but they'll usually confirm if the firm has an account and may tell if they regularly disburse funds from that account.

2. CHECKING OUT OTHER BORROWERS

Most importantly, ask to speak with a borrower who has had a deal recently funded by the "lender." Don't be put off if the "lender" refuses to give a borrower's name by claiming to be bound by a non disclosure agreement. They aren't giving up any secrets about a loan transaction by giving you the name of the borrower. This information is available to the public in most states through title documents, trust deeds, etc.

3. ARE THEY MEMBERS OF A TRADE ASSOCIATION?

Ask them if they are members of any trade organization such as the National Association of Mortgage Brokers, Mortgage Bankers Association of America, or other well known national organization. In most cases, a qualified lender shares

new ideas with their counterparts, and is known in the industry.

4. THINGS TO WATCH FOR

It sounds like a cliche but if something sounds too good to be true, it likely isn't true. Be wary of "lenders" offering to underwrite loans to LTV's well above 75 ⁰/a and debt service coverages under 1.2. These are industry standards. Fannie Mae will buy loans up to 80% LTV Participating mortgage lenders will fund loans up to 90% but they'll ask for "a piece of the project 'action" too Be wary of loans at well below market rates. Ask yourself why this lender is able to offer such items when other lenders just turn up their noses. Scams almost always use catchy jargon or phrases to draw borrowers into their net. The latest carrot dangled by financial scams is "blocked funds." Past phrases to watch for include 'prime bank guarantees " [PBGs], "prime bank notes" [PBNs], and "Ginnie Mae collateral." All these terms have been employed by scam artists in an attempt to fool borrowers into thinking the lending programs they offer are real. Don't fall for them. None of these sup posed funding techniques are legitimate.

Make sure whomever is seeking financing on your behalf, remembers the old cliche "buyer beware."

Anthony M Gramza is President of AMG Commercial Mortgage Group, a privately held mortgage brokerage firm in Rochester, New York. (716) 671-5250 or fax (716) 671-7119.