BayView Financial Trading Group, well known in the home loan industry as an adviser on mergers and a broker of servicing rights, is expanding into commercial mortgages.

In June the Miami investment bank began originating small commercial mortgages through brokers and correspondents. It expects to add from $300 million to $400 million of commercial mortgages this year, including portfolio purchases, and aims to carve a niche as an alternative to so-called hard-money lenders.

Landlords with credit problems or odd properties often have nowhere else to turn but hard-money lenders, which generally offer short-term loans with steep exit fees and interest rates as high as 18%. For such borrowers BayView offers a permanent loan that amortizes over 15 years, with no balloon payment at the end. Prepayment is prohibited during the first two years, but after five years there is no prepayment penalty. BayView charges interest rates of 10.5% to 15%.

The average loan size is $500,000, and BayView will lend as much as $2.5 million. The targeted borrowers include those with imperfect credit but a liquid and valuable building, or good credit but an unconventional property - such as a gas station, or a sundries store with a residence attached. Or it might make loans in which both borrower and property meet traditional lending criteria but the debt service coverage ratio is too high for most lenders. The loans also are geared to borrowers that need money sooner than a bank could approve a loan.

BayView lends from 50% to 70% of a property's value; it will go up to 75% for some creditworthy borrowers but no higher. The firm requires full recourse and considers a borrower's credit score.

"We're a common-sense lender," said David Quint, president and chief operating officer at BayView. "If it's a good loan, it doesn't matter if it fits in the box."

Since it began securitizing home loans in 1998, BayView has included a small amount of commercial loans in the same pools. This year, it plans to issue about $300 million of bonds each quarter. Commercial mortgages will continue to be a small share of the collateral.

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