Last Quiz - Chapt 20 1. How does the commercial mortgage...

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Chapt 20 1. How does the commercial mortgage underwriting process differ from residential mortgage underwriting? Answer: There is much more emphasis on the property and income generation of the property versus emphasis on the borrower in residential lending. In non- recourse loans the borrower is not considered in detail, but the property is carefully reviewed. In commercial lending the LTV tends to run lower, generally no more than 75%. Commercial loans are not prepayable except with significant penalties. 3. A property has a stable net operating income of $1,500,000 per year. With a loan- to-value ratio of 75%, a required debt service coverage ratio of 1.20, and contract rates at 9.0% for 25-year amortization, 5-year balloon notes, what is the maximum mortgage that this property can borrow? Answer: $1,500,000/1.2/12 = $104,166.67 for payments that support $12,412,669 for a 9%, 25-year amortization. The 5-year balloon does not factor into the calculation nor will the LTV unless the appraised value is less than $16,550,225, in which case the LTV will limit the loan to less than that supportable by the income and debt coverage ratio. 4. Describe the primary elements in a loan application package.
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This note was uploaded on 09/01/2011 for the course BUSINESS 101 taught by Professor Jones during the Spring '11 term at Southern Nazarene.

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Last Quiz - Chapt 20 1. How does the commercial mortgage...

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