Adding an investor-loan desk to a shop that's 90% conventional

Question

We're four originators and a processor. Purchase volume is holding but refi is basically gone, and two of the four are living off a pipeline that's thinner than it was. I've been getting a steady trickle of calls from people who own four to nine rentals and want cash out, and I keep handing them to a broker across town because we're not approved anywhere that does DSCR or bridge.

I'm leaning toward building the desk with one person, not all four. Reasoning: the lender approval packages take weeks, the guidelines are nothing like agency, and I'd rather have one person who genuinely knows six private lenders' boxes than four people who half-know them and blow up files.

What I can't work out is comp. My people are on a percentage of the lender-paid comp, which is a plan built for consumer loans. If the same person originates a business-purpose bridge loan where we're charging the borrower two points, how do people structure that without creating a mess? And is one dedicated person actually the right call or am I starving the desk of at-bats?

Rena Expert · Accepted Answer

One person is the right shape for the first year, for a reason you didn't list. Private lender guidelines aren't published in a way you can look up, they live in the AE relationship, and knowing that lender C will go to 75 percent LTV on a rural duplex if the appraisal has two closed comps inside a mile is knowledge that doesn't distribute across four people. Split the desk once the one person is turning down files for lack of hours.

Comp needs a separate plan and it needs a lawyer's eyes, because your existing plan was drafted against Reg Z's LO comp rule and that rule reaches consumer credit secured by a dwelling. Business-purpose entity loans on investment property generally sit outside it, which is what gives you freedom to pay differently on those files. The trap is a plan that pays an originator more on business-purpose deals in a way that gives them a reason to characterize a consumer-purpose refinance as a business one. Occupancy and use are facts, and mischaracterizing them is the loan officer's and the lender's problem, then yours.

Unit economics to plan against: a $300k DSCR cash-out at 2 points is $6,000 gross, cycle 30 to 45 days, pull-through worse than agency. Compare $420k conventional at 1.75 lender-paid, $7,350, on a tighter cycle. Per file it looks like a downgrade. The repeat rate is where it pays. An investor doing four projects a year comes back four times and brings his lender-shy contractor, while your purchase borrower comes back in seven years if you're lucky.

Watch working capital. Some private lenders pay broker comp out of funding, some pay on a monthly cycle after funding, and a desk that's growing can be up 60 days on receivables.

monica_tran3 · Answer

The part that cost us the most time when we widened out wasn't guidelines, it was that the referral base is a different set of people entirely. Conventional flow comes from agents. Investor flow comes from wholesalers, GC's, the two title reps who close all the assignments, and the local REIA. None of those people knew our name. Budget six to nine months of showing up before the phone does anything, and pick the one person for the desk based on whether they'll sit through a Tuesday night meetup, not on production.

Adding an investor-loan desk to a shop that's 90% conventional

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