Mortgage Credit Panel Discussion 2015 Midwest Lenders Conference Chicago, Illinois * October 12 -...
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Transcript of Mortgage Credit Panel Discussion 2015 Midwest Lenders Conference Chicago, Illinois * October 12 -...
Mortgage Credit Panel Discussion
2015 Midwest Lenders Conference
Chicago, Illinois * October 12 - 14, 2015
Moderator: Rick Sherman, BerkadiaPanelists: Tom Bernaciak, HUD - Headquarters
Steve Ott, HUD - ChicagoBrett Neely, Great Lakes Financial
2
Revised Definitions – 2015 MAP Guide
Principal – Individuals or entities that exercise operational and/or financial control over a project. There are two types of Principals:
Active Principal – responsible for execution of all activities for the benefit of the project, regardless of the extent of ownership interest
Passive Principal – has limited or no decision making power or control, but has an ownership interest of >25% (10% for corporations)
Midwest Lenders– Mortgage Credit Discussion Panel
3
Common Attributes of a Principal
Maintains significant decision making authority
May have significant ownership interest
Involves active participation in directing the affairs of the entity
Positive past experience in developing or owning comparable properties
Midwest Lenders– Mortgage Credit Discussion Panel
4
Which Principals Undergo Credit Review?
Active Principals with >25% interest in the borrowing entity (10% for a corporation)
Active Principals with <25% ownership interest but possessing substantial financial interest or having decision making authority
An investor determined to be an essential partner from a financial and cash contribution standpoint but with <25% ownership interest
Midwest Lenders– Mortgage Credit Discussion Panel
5
Which Principals Undergo Credit Review, cont.?
Investors that have exceeded the $250M threshold or wish to avoid exceeding the threshold and wish to invest as a passive investor with less than 25% interest;
Investor with significant assets and financial contribution with an ownership interest of < 25%.
Midwest Lenders– Mortgage Credit Discussion Panel
6
Non-Profit Principals
Generally understood to mean the borrowing entity and its Board of Directors.
Financial analysis limited to: 2530 review of ownership entity and officers and resumes
of officers, and Financial and credit review of Borrowing entity
“Sponsor” – informal term used to define persons or entities who assist in development of the project
May also act as a Principal in the project
Midwest Lenders– Mortgage Credit Discussion Panel
7
Regulatory Agreement Provision Section 50
Determine the individual and/or entity with requisite control and involvement or interest in the project
Possesses positive credit history and adequate financial strength
Midwest Lenders– Mortgage Credit Discussion Panel
8
Credit & Financial Review
Financial statements REO Schedule Credit reports/credit references Form 92013-SUPP Verification of Deposits/Bank statements Resume Internet search
Midwest Lenders– Mortgage Credit Discussion Panel
General Comments
A. Less check the box, more substantive underwriting.
B. Early issue identification (Note: focus on “early”).
Mortgage Credit Top 2 + 10
Mortgage Credit Top 2 + 10 Successful and comparable experience: Type,
scope, size, operationally, market.
Organizational Charts/Borrower Narratives: Unclear and/or insufficient detail.
Section 50 Signatory: Failure to adequately identify.
Net Worth and Liquidity: Analysis and identify adjustments.
VODs: See General Comment A.
Mortgage Credit Top 2 + 10 REO/Debt Schedule: Insufficient analysis of
portfolio and risk Active Principals, if aging and/or retiring:
Succession Plan? Multi-layered financing: More detailed S&U and
flow of funds. Acquisitions/Recently Acquired Projects:
previous financials Processing Inconsistencies: HUD Forms,
Narrative, etc.
MAP GuideHandbooks Notices
MLs
MORTGAGE CREDIT TOOLBOX
Financial Stmts &
REO
Credit Reports
HUD
Forms
IOD’s & Reserves
The Voice, LLCMortgagor
100% Owner
Adam Levine76% Managing Member
Blake Shelton24% Member
Sample Organizational ChartLimited Liability Corporation (For Profit)
The Voice, LLCMortgagor
100% Owner
Adam Levine76% Member
Blake Shelton24% Managing Member
Sample Organizational ChartLimited Liability Corporation (For Profit)
Born in Chicago, LLCMortgagor
100% Owner
Actors, LLC50% Managing
Member
Harrison Ford51% Managing
Member
Donald O’Connor49% Member
Singers, LP50% Member
Nat King Cole49% General Partner
Dancers, LP51% Limited Partner
Bob Fosse25% General Partner
Other Limited Partners
< 10% each
Sample Organizational ChartLimited Liability Company (For Profit)
EFFECTIVE INTEREST
25.5% Eff 24.5% Eff 24.5% Eff 25.5% Eff
6.375% Eff
Rolling Stones, Inc.Non-Profit Mortgagor
100% Owner
Mick JaggerPresident
Keith RichardsVice President
Charlie WattsDirector
Mick TaylorDirector
Sample Organizational ChartLimited Partnership (Non-Profit)
The Voice, LPMortgagor
100% Owner
Blake Shelton
24% Limited Partner
Adam Levine
24% Limited Partner
Gwen Stefanie
10% Limited Partner
Usher Raymond
10% Limited Partner
Pharrell Williams
10% Limited Partner
Cee Lo Green
10% Limited Partner
Christina Aguilera
10% Limited Partner
Carson Daly
2% General Partner
Sample Organizational ChartLimited Partnership (For Profit)
The Fab Four, LLCMortgagor
100% Owner
Eleanor Rigby, LLC10% Managing Member
Yoko Ono1% Managing Member
John Lennon99% member
Penny Lane, Inc.90% Member
Ringo StarrPresident
George HarrisonSecretary
Paul McCartneyTreasurer
Sample Organizational ChartLimited Liability Corporation (For Profit)
80% Shareholder
20% Shareholder
The Fab Four, LLCMortgagor
100% Owner
Eleanor Rigby, LLC10% Managing Member
Yoko Ono1% Managing Member
John Lennon99% member
Penny Lane, Inc.90% Member
Ringo StarrPresident
George HarrisonSecretary
Paul McCartneyTreasurer
Liverpool Ltd. A United Kington
Corporation100% Shareholder
Sample Organizational ChartLimited Liability Corporation (For Profit)
Bootleggers, LLCMortgagor
100% Owner
Windy City, LLC76% Managing
Member
Dion O’Banion40% Managing
Member
John Dillinger30% Member
Alfonse Capone30% Member
Second City, LP24% Member
Sample Organizational ChartLimited Liability Company (For Profit)
EFFECTIVE INTEREST
30.4% Eff 22.8% Eff 22.8% Eff
Bootleggers, LLCMortgagor
100% Owner
Windy City, LLC76% Managing
Member
Dion O’Banion40% Managing
Member
John Dillinger30% Member
Alfonse Capone30% Member
Second City, LP24% Member
Bugs Moran50% Managing
Member
Alfonse Capone50% Member
Sample Organizational ChartLimited Liability Company (For Profit)
EFFECTIVE INTEREST
30.4% Eff 22.8% Eff 34.8% Eff 12.0% Eff 34.8% Eff