Why would any lawyer conjure upthe term “loan closing experience”?

It is a welcomed professional kumbaya moment following a loanclosing when emails start flying with expressions of appreciationfrom borrower to title counsel, loan officer, loan underwriter andoutside counsel.

It comes less with credit union loans than with loans closed forother lenders, especially commercial mortgage-based securities,life insurance companies and Fannie Mae or Freddie Mac multifamily.Ironically, credit unions offer the best loans at the best rates.But closing loans is not just about rates. It is also about thecomplete closing experience.

Credit unions are focused on member experiences and enrichingmember relationships. Most commercial real estate borrowers are notcredit union members when walking through the credit union door forthe first time for a loan.

While borrowers want loans and credit unions want to lend money,closing loans is no different than any consumer experience.Borrowers are looking for a positive experience. They want to betreated like a Nordstrom shopper.

Among the top 10 reasons for the loan closing experience forborrowers of credit union loans not always being a positiveexperience is the following:

1. Time to close was far beyond that projected bylender.

2. Best lending practices not employed.

3. Credit union reliance and/or delegating to consultantsin absence of in-house expertise sometimes resulting ininefficiencies and other issues not common to a borrower'sexperience with other lenders.

4. Poor communications.

5. Process for negotiation of loan documents not smooth(especially when working with industry templates which are in toomany instances generic, one-size fits all and ironically may bedeficient in best protecting credit unions interests).

6. Not managing borrower expectations.

7. Not delivering at closing what was promised atstart.

8. Lack of trained professionals at every step of theclosing process.

9. Involving legal counsel in on an ad hoc basis late inthe closing process, resulting in further delays.

10. Lack of institutional lending commercial real estate lendingculture.

Underlying all these issues may be that in the credit unionindustry too often commercial real estate lending is an appendageto member business lending in general, or staffed by those involvedin residential lending being recruited to do commercial real estateloan closings.

Credit union commercial real estate lending must be a creditunion-developed specialty.

Next Page: Meeting Demands

Borrowers needing commercial real estate loans can besophisticated, demanding and, either wittingly or unwittingly, maynot provide complete answers or provide complete informationrequested by lenders.

Problematically, some brokers bringing loans to credit unionsfall in the same three categories. Add to the equation that inmany, if not most, cases the credit union commercial real estateloan is a loan from a broker's “third drawer” that cannot be placedwith major banks, life insurance companies and other institutionsor already rejected by them.

The skill set to work with credit union commercial real estateborrowers or their brokers is not the same as any other activity incredit union lending. It is a discipline in and of itself. Failureto meet their expectations, failure to treat them with finesse, orfailure to be at least as expert as other lenders they haveborrowed from, and they will not be back with another loan (andexcept for the truly dishonest borrower, you want them back).

Treat them like a Nordstrom shopper and they will be back againand again.

Not all will always go well, but properly identifying issues andbeing solution-focused builds relationships.

When law firms are employed in non-credit union lending, theclosing process takes a different tempo, level of expertise, and inmost cases, positivity. What transpires is the following: law firmsimmediately get out “hello letters” to borrowers with sample loandocuments, outline of closing requirements and closingchecklists.

Title commitments are ordered and reviewed early. Counsel isalso identifying issues and quickly bringing them to the attentionof underwriters, bringing them to the attention of borrowers.Subordination and non-disturbance agreements needing to benegotiated are moved quickly. Escrow companies are made gameplayers.

The age-old cartoon of escrow agent, title officer and lawyerrowing together to the finish line, takes on “real time” and comesto life. Some loans can be effectively fast tracked. Expectationsare well managed. It is the experience that borrowers expect.

Contrast what makes a good closing with how some credit unionsclose loans. Non- lawyers at credit unions dealing withborrower lawyers. Borrowers or their lawyers not seeing loandocuments until a few days prior to closing. Failure of goodcommunications with borrower and or borrower's broker. Title reviewnot conducted until shortly before closing. Too close to theclosing date, there may be a first time look at borrower trusts orentity formation documents.

Flash back to the old cartoon of everyone rowing together, andinstead, you see a shell filled with caricatures of unsynchronizedrowers and the bow at a 45-degree angle dipping in the water.

To create the positive credit union loan closing experiencerequires a complete review of all procedures and practices. Seekfeedback. Send questionnaires to borrowers following the closing,no different than the email questionnaire emailed to you followingthe last hotel you stayed in that wants to know about every elementof its operations and whether or not your stay was pleasurable.Rate the originator, underwriter and yes, the lawyer.

Credit unions engaging in commercial lending need to create acommercial real estate lending culture. Quality lender-borrowerrelationships grow from a positive loan closing experience. Not allwill always go well, but properly identifying issues and beingsolution focused builds relationships with yields that far exceed asingle loan.

Gordon L. Gerson is managing principal ofGerson Law Firmin San Diego. He can be reached at (858)869-8686 or [email protected].