Articles by Patrick Niland



By Patrick Niland - The Mortgage Master
(originally published in the June 1992 issue of Habitat Magazine)

Where do property managers go when they want a power breakfast? Lately, the preferred meal of management professionals has been the N.Y. Habitat Managers Club, a monthly breakfast gathering that offers information, suggestions, and useful tips on topics of concern to agents and management executives.

The subjects have been wide-ranging, from attorney Richard Siegler's suggestions on "How to prepare for, and run an annual shareholders' meeting" to accountant Mark B. Shernicoff's review of financial statements.

But, the liveliest meeting features Patrick Niland, president of First Funding, a mortgage brokerage firm that specializes in underlying co-op mortgage loans, who preached a doctrine of interaction and pro-action.

"I want to get a sense of the problems you face," Mr. Niland began as he walked mong the tables like a financial Phil Donahue.

"What are your problems, as a rule?" Silence. The broker looked around. "You have no problems?" Laughter—and then someone called out, "Boards!" More laughter and then more comments: "Lack of knowledge!" "Lack of patience!" "They don't understand how long it takes to get action!"

"Indeed," smiled Niland, moving smoothly into his topic, "boards don't understand what they're supposed to do. A co-op is a corporation, just like IBM or General Motors Its board has exactly the same fiduciary responsibilities. The co-op's chief executive officer is the board president—but unlike the chief executive at IBM or General Motors who came up through the ranks, a co-op president is usually not very knowledgeable about what he needs to do. You, as managing agent, are the chief operating officer. The board hired you to run the building precisely because they don't know what to do—you shouldn't let them forget that. They hired you because you have the necessary skill and experience."

Niland was then off and running, using a lively mixture of humor, questions and answers, and solid advice to explore his topic: refinancing a building's underlying mortgage. He made familiar information seem fresh with his engaging, dynamic approach, jumping from the general—"When you refinance, you have to look at the whole picture: at the physical as well as financial aspects of a building"—to a more specific list of actions that a manager and board can take to prepare for a lender's review.

Among Niland's key points, for instance, was "know the lender—and know when you are wasting time." Boards can go to banks, insurance companies, mortgage operations, and pension fund groups, he observed, but each has its drawbacks. For example, pension fund companies, are very conservative and are interested only in very large loans on the very finest of properties. Insurance companies, on the other hand, will consider smaller long-term financing but impose stiff prepayment penalties.

Niland also warned about the wariness of banks to make loans because of changing market values, and about the danger of overestimating a building's worth: "Many boards think because their building was valued at a million dollars in the mid '80s, they won't have a problem getting a new loan today. But lenders always look at the worst case scenario: what is the value if they have to foreclose on and then rent out the building." He added that recent court decisions would limit rents in foreclosed buildings to stabilization rates instead of market values – a fact that has made lenders even more wary of lending to "iffy" co-ops.

All the more reason, Niland notes, for a manger to be on top of the situation: working with the board, engineers, architects, and building staff to anticipate the needs and requirements of potential lenders. "Nothing frustrates a loan officer more than borrowers who can't answer even the most fundamental questions or buildings with obvious deferred maintenance," he said.

"What's the best way to do that?" asked one manager at the meeting. Always the good showman, Niland took out some coins and said, "Who has a dollar bill for five quarters?" After he had made the exchange, he explained : "That's how. You go to a mortgage broker. He knows what lenders want. He knows how to save you money. In fact, if I can't save you more than the cost of my fee, I'll work for free. It's that simple."


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