Hello to commercial lenders. I am a syndicator and multi-family investor that targets about 8 different markets across the U.S. Somebody in one of my investment meet-ups had brought up a term called "pre-review" which was described to me as areas within the states that lenders will generally lend less depending on where those areas are located. Does this only pertain to secondary markets or could this also happen in say a large metropolitan area? Also if Pre-review can be described in it's definition that would be great. Thanks for the help everyone.
I'm not a lender but my understanding of pre-review is that it is a term specifically related to Fannie Mae loans and not Freddie Mac. Fannie Mae has what they call DUS lenders (delegated underwriting and servicing), which are basically trusted banks/lenders that are allowed to underwrite loans themselves and sign off on it without going back to Fannie Mae for approval. For markets that are considered pre-review, the DUS lenders will underwrite and then have to send to Fannie Mae for final approval. Whereas with Freddie Mac, approvals always have to come straight from them.
And no, it's not just secondary markets. It's for all markets that they see elevated risk. Houston is a pre-review market, for example, and it's not because it's a small city but because of the Oil & Gas market. Some other markets could be pre-review because Fannie is already lending too heavily there so they are potentially overexposed.
@Michael Le thank you for the response. You gave such a better explanation then I had heard previously. Good to know cause Houston is an area of interest for me and now I know to do a little more due diligence for loans in this area.
Do you know of some areas off the top of your head that may fall under these pre-review guidelines?
I do not have a list but I'm sure a quick email to your lender/mortgage broker will get you what you need.
@Manuel Perez @Michael Le , Pre-Review is for both Fannie Mae and Freddie Mac loans and more specifically mostly in their Small Balance Loan programs. Both Fannie and Freddie have licensed seller/servicers of their products, or DUS lenders. Both Freddie and Fannie loans are underwritten by those lenders and then their underwriting package is submitted to Fannie and Freddie for final review. These lenders are very familiar with both of their operations so final approval is almost always positive if you're going to a well known highly ranked shop. Pre-review will come into place for certain areas that Freddie and Fannie require. For instance, certain South Side neighborhoods in Chicago require a pre-review/pre-approval in order to move forward with that deal. The process takes sometimes 1-3 days to receive an answer back. As long as the property is operating well and in average to above average shape you shouldn't have an issue. Freddie and Fannie will look at crime reports for that area, if their is a significant amount of "violent crime" they tend to try and shy away or limit their exposure on a case by case basis.
Thanks, @Tom Keating , for correcting me. I did not realize Freddie has DUS lenders too.
Not a problem, @Michael Le . Yes, they have a handful of lenders to originate their Small Balance Loan (SBL) program. Another great, non-recourse debt program that originates loans in the $1mm-$7.5mm range with interest only capabilities and flexible pre-payment.
@Manuel Perez Yes, I will reach out to some of my agency contacts tomorrow and see what I can get for you.
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