A life insurance company that makes long-term, fixed-rate commercial mortgage loans with its own investment money and usually keeps them.
The OCC’s commercial real estate handbook names life insurance companies, with pension funds, as nonbank providers of permanent financing. It gives the reason: these companies have long-term investment needs and find terms of 10 years or longer on a fixed-rate basis attractive. An insurer owes policy payments decades out, so a long fixed-rate mortgage on a stable building suits what it has to pay. The handbook adds that loans from these sources are commonly nonrecourse.
Borrowers meet life companies in two places. One is the refinance or purchase of a stabilized property, where the long fixed rate is the draw. The other is the forward commitment. The handbook describes a permanent lender, frequently a life insurance company, committing to refinance a construction loan once the project is complete and, almost always, leased, which lets the borrower lock a fixed rate before funding. A construction lender may count on that commitment as its way out.
Life companies lend through their own staff and through mortgage bankers who act as their correspondents. They choose loans as investments, so a property or a location outside their plan gets a quick no.
How it shows up in the data here
Life insurance companies are not in this site's lender list. They do not file bank or credit union call reports, so their commercial mortgage holdings are not here. One could appear only where it reported a housing loan under HMDA. For lenders with public loan books, see investor CRE lenders and multifamily lenders.
Go further
- Investor CRE lenders: Banks and credit unions holding non-owner-occupied commercial property loans.
- Multifamily lenders: Lenders with multifamily loans on the public record.
- DSCR calculator: Cash flow over debt service. Type the cash flow and the loan terms, see the ratio and the cushion before it falls to 1.00x.
- LTV and LTC calculator: Loan to value and loan to cost, the equity a lender will ask for, and the federal supervisory limit for the property type.
- Investor commercial real estate loan checklist: On an investor property the rent pays the loan. The package is the evidence for the rent: who pays it, for how long, what it costs to collect, and who stands behind the borrower if it stops.
- What to do after a bank says no to a business loan: One bank's no is one lender's answer, and the reasons are yours to ask for. They usually point to a constraint you can name.
Related terms
- Permanent loan: A longer-term loan on a finished, leased property that replaces the construction or bridge loan and is repaid from the property's income.
- Take-out loan: The permanent loan that pays off a construction loan, or the commitment from a lender to make that loan once the project is finished and leased.
- CMBS conduit loan: A commercial property loan made to be pooled with other loans and sold to investors as commercial mortgage-backed securities, not kept by the lender that made it.
- Non-recourse loan: A loan the lender can collect only from the property pledged for it, not from the guarantor personally, except for listed bad acts.
- Fixed rate loan: A loan whose interest rate is set at closing and does not change for a stated period, often the whole term, so the principal and interest payment stays the same.
- Non-bank lender: A non-bank lender is a company that makes loans but does not take deposits, so it is not a bank, a savings institution or a credit union.
- Portfolio lender: A portfolio lender is a lender that keeps the loans it makes on its own books instead of selling them to an investor.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.