Lender offers guide for one type of difficult deal

Brokers are often frustrated when dealing with underwriting requirements and trying to get a deal done, but one leading lender has shared a helpful list of tips for securing one type of difficult deal.

“Canada’s apartment sector is underpinned to a large extent by loan insurance provided by Canada Mortgage and Housing Corporation (CMHC),” CMLS Financial wrote in its latest Commercial Mortgage Insights report, entitled “Seven Steps To A Successful CMHC Commercial Mortgage Application For Rental Properties”. “This is appropriate since the number one risk faced by apartment owners is regulatory.”

CMLS lays out the seven elements required in every commercial mortgage application. See below for a synopsis of each so that you – and your clients – are always fully prepared.

1. CMHC application fee

This is an up-front fee of $150 per suite for any building that has 100 suites or less. The price is lowered to $100 per suite in excess of 100.

2. Property description and photographs

This includes the address of the property, the number of suites and a brief description of the property.

3. Rent roll

“A current rent roll is mandatory. It must show all suites, tenant names or vacant suites, suite type by bedroom count and base rent per month for each suite,” the report states. “In cases where uncertainty exists in vacancy or rent levels, it may be necessary to provide historic rent rolls.”

4. Financial statements

Three years’ worth of borrower financial statements is required.

5. Environmental report

CMHC will not lend on any property that does not meet sufficient environmental standard. The lender rep can advise brokers what exactly is needed for both phase 1 and phase 2 reports.

6. Sponsorship info

“All loans over 60% of CMHC’s lending value must be supported by guarantees,” the report states. “CMHC requires an accurate description of the property’s ownership structure.”

7. Due diligence documents

These include a building condition or appraisal report, purchase documents, debt details, copies of the utility, tax and insurance bills, and property management contracts, among others.

To read the report in its entirety, click here.