Knowledge Base

Commercial Financing and Blanket Commercial Loans

Commercial Mortgage Lenders Usually Prefer Not to Blanket Several Properties

I saw a commercial loan application on C-Loans recently for $10 million loan where the commercial mortgage broker was trying to obtain a blanket loan over 10 different commercial properties owned by the same borrower but spread out all across town.

A blanket loan is one where there is just one promissory note (I promise to pay $10 million ...), but the note is secured by several different mortgages on several different non-contiguous parcels. If the parcels were contiguous (touching), it is customary for the lender to use just one mortgage and to include each of the contiguous parcels in the legal description of the property. Where the properties are clearly different and separated from each other, it is customary to use a separate mortgage for each separate property.

So why would a borrower want to get a blanket mortgage? He might think that he is saving money on closing costs by making the loan just one big deal. In addition, the larger the commercial loan, the slightly lower the interest rate.

But commercial lenders in general do not like to blanket properties, especially if the properties have different uses. Few commercial mortgage lenders would jump at the opportunity, for example, to make a blanket loan across an apartment building and an office building. This is especially true if the commercial mortgage lender loved apartment loans but hated office building loans becasue they are over-built, or vice versa.

Blanket commercial loans are messy and complicated. They are also very difficult for a commercial mortgage lender to re-sell in the secondary market. Certainly conduits and life companies would rarely make a blanket loan. Most banks would pass as well.

Some commercial mortgage lenders will indeed blanket different properties, but they will usually only do so if they feel insecure. Certainly hard money lenders and the occasional bank, lending for its own portfolio will consider a blanket loan. The most common blanket loan you will see, however, is one where the commercial mortgage lender blankets the borrower's personal residence.

So if you get a request for a blanket commercial mortgage loan, be smart. Split the deal up into several smaller loans.

You can find hundreds of commercial lenders for just about any commercial property type on C-Loans: C-Loans Commercial Mortgage Lender Databank.

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