Simple Truths in Underwriting: Make Sure the Borrower Profits
by John Odegard, CEO, Seattle Funding GroupI‘ll never forget the simple “ah ha” I had many years ago after our team was wrestling with a lending decision on a construction loan that in many ways seemed routine. After a long value debate our newest underwriter asked the unexpectedly perplexing question. “I don’t see how the builder is going to make any money. It looks like we will be protected, but he won’t. Why is Mr. X even taking on this project?” The boardroom was silent as we each went back through the numbers, this time with the builder’s success in mind. He was going to break even at best. Even if the lender is well secured, if there is nothing in it for the borrower, everyone loses.