THE ICS UNDERWRITING PROCESS
Stage One Underwriting (POE Evaluation)
ICS will process and underwrite the loan, completing a Property, Owner, and Encumbrance Evaluation Report (POE REPORT) before an Appraisal and other 3rd party reports are ordered. The POE Evaluation Report includes a preliminary review of the property Title, Deed, current liens, transaction history, zoning, intended property use, permits, licensing, property taxes, property income & expenses, and any other encumbrances that could affect the proposed financing. A background check, credit, and personal financial statement analysis will be completed on the sponsoring borrower(s) to ensure there are no personal income, credit, or background related issues that could affect the proposed financing. The POE Evaluation Report & Underwriting Fee is due immediately upon acceptance of this Letter of Interest. The POE ensures additional Lender underwriting, appraisal, and other 3rd party report costs are not incurred by the sponsoring borrower should POE Evaluation findings result in immediate loan cancellation and loan turn-down by ICS. In the event ICS cancels and denies the loan funding assignment in its entirety, the POE Underwriting Evaluation Fee will be refunded, less actual labor and material costs incurred to underwrite the loan. The POE Underwriting Fee is non-refundable should sponsoring borrower decide not to move forward with financing for any reason, unless the loan funding assignment has been denied and cancelled by ICS. In the event the POE Evaluation results in altered loan terms, those revisions will be outlined within a revised Final Lender Term Sheet and/or Lender Loan Commitment.
ICS charges a Stage One (POE) Underwriting Fee of $2,500 to $25,000+ for loans depending upon project size and type. This fee is non-refundable unless ICS cancels and denies the loan in its entirety. The LOI will breakdown the POE fee and all estimated costs. ICS may accept this fee paid at closing instead of upfront at the sole discretion of ICS depending on property and loan type.
Stage Two Final Lender Underwriting
Once the Final Lender has been selected and a Final Lender Term Sheet (if needed) has been mutually executed stage two underwriting commences. During this underwriting stage the Final Lender orders an appraisal, and when required, phase 1 and possibly phase 2 environmental reports. The Final Lender completes all necessary due diligence, including review and confirmation of ICS underwriting findings. Once the appraisal is reviewed and accepted, the Final Lender issues a final loan commitment. At this time the Lender's legal team drafts loan documents, completes revisions with borrower or borrower's counsel, and issues a clear to close with escrow to schedule signing.
Appraisal fees are collected by the final Lender or paid directly to the appraisal company by the Borrowing group as determined by Lender. Below are estimated appraisal costs which can vary greatly depending upon property size and type.
Lender Appraisal Review, Due Diligence, Legal, Loan Document Draft & Completion, Lender Onsite
- 1 to 4-Unit Residential: $650 to $1250
- Commercial, Multifamily, Specialty Use: $2,000 to $5,000+
The Final Lender in most cases will require a Stage Two underwriting deposit to cover all property evaluation reports, due diligence, and legal work. Stage Two underwriting deposits range from as low as $500 for 1 to 4-units, and up to 0.3 to 1% of the loan amount depending upon the property type and loan size. All Final Lender underwriting deposits are outlined in detail on the Final Lender Term Sheet prior to moving forward with stage two underwriting.
Final Lender Underwriting fees are refundable, less actual costs incurred, including 3rd party report costs, legal, and underwriting hours billed.
Why does ICS complete Stage One Underwriting (POE) before Stage 2 Underwriting & Final Lender Term Sheets?
Very few lenders, loan brokers, or loan brokerages complete any in-depth loan underwriting prior to issuing term sheets, outside of reviewing property and owner income, assets, and credit from a bird's eye view. This can put the Borrower in a bad position if the loan is turned down later. ICS fully underwrites loans, not including appraisal and legal, before loans are presented and underwritten by ICS across multiple lenders. This dramatically reduces the possibility of the Final Lender denying the loan weeks down the road after substantial Final Lender underwriting deposits have been paid and consumed to complete an appraisal, lender due diligence, and other 3rd party reports. Our goal is to save clients time, make sure loans are not submitted and underwritten with inappropriate lenders for the loan request, and minimize overall underwriting expenses and potential underwriting fee losses in the event of Final Lender denial or borrower loan cancellation. In short, we aim to uncover potential issues earlier rather than later that may affect the proposed financing.