Commercial Loans Blog

Commercial Real Estate Loan Portfolios Are Shrinking as U.S. Commercial Mortgage Universe Shrinks Again to $3.31 Trillion

Posted by George Blackburne on Mon, Jun 28, 2010

Commercial Mortgages Are Being Paid Down or Written Off

The size of the commercial mortgage market in the United States continued shrinking in the first quarter, to $3.31 trillion from $3.34 trillion at the end of last year, according to the Mortgage Bankers Association's analysis of Federal Reserve Board flow-of-funds data. The universe of mortgages has now shrunk for five consecutive quarters and is now roughly the same size it was at the end of 2007.

Every major investor group, except the housing-finance agencies, private pensions, savings institutions and government entities, saw a reduction in the size of their mortgage portfolios. Commercial banking organizations saw an $18.9 billion, or 1.3 percent reduction in the size of their holdings, to $1.49 trillion. They are still the biggest holders of loans, accounting for 44.9 percent of the entire universe, down from 45.1 percent at the end of the fourth quarter.

CMBS and other securitization vehicles saw their portfolio of mortgages shrink by 1.6 percent over the last quarter to $679 billion. That accounts for 20.5 percent of the universe, down from 20.6 percent in the fourth quarter.

Life-insurance companies, which lately have become hungry to write loans but have faced tepid demand, saw their holdings fall by $4.4 billion, or 1.4 percent, to $301.9 billion. They now hold 9.1 percent of the total universe, down slightly from 9.2 percent at the end of last year.

The housing-finance agencies, meanwhile, saw their portfolios grow by $5.8 billion, or 1.9 percent, to $309 billion. That represents 9.3 percent of the commercial mortgage universe, up from 9.1 percent in the fourth quarter. If you look at only multifamily loans, the agencies - Fannie Mae, Freddie Mac and agency-backed mortgage pools - hold 36.3 percent of the $852.1 billion universe. That universe is up from $849 billion in the fourth quarter - testament that the agencies continue to actively write loans.

"Low levels of commercial mortgage borrowing mean that property investors are paying off and paying down more in mortgages than they are taking out," explained Jamie Woodwell, vice president of commercial real estate research at the MBA.  (Commercial Real Estate Direct)

Topics: commercial lender

SBA to Guarantee 504 First Mortgages

Posted by George Blackburne on Mon, Jun 28, 2010

New Loan Poolers Will Help Jump Start Secondary Market for 504 Loans

The U.S. Small Business Administration (SBA) announced the first nine loan pool originators authorized by the agency to assemble and sell pools of 504 program first mortgage loans, a major step to jump starting a secondary market that should make fixed-asset financing more widely available for small businesses. The new program was approved under the American Recovery and Reinvestment Act.

Prior to the recent disruption in the credit market, a private secondary market for these loans existed, but it has not revived as the economy has started to rebound. The SBA expects this new program to breathe life into that secondary market and improve access to credit for small businesses by providing a resource that can help boost liquidity to small business lenders.

"With the resources provided in the Recovery Act, we have engineered a turnaround in its SBA lending, putting nearly $30 billion in the hands of small businesses across the country," said SBA Administrator Karen Mills. "This added support to re-launch the 504 first mortgage secondary market builds on that success and will help leverage even more capital for small businesses to support their growth and create new jobs."

Under the program, the SBA will provide a government guarantee on pools of portions of eligible 504 first mortgage loans assembled by approved pool originators to be sold to third-party investors. Lenders will retain at least 15% of each individual loan, pool originators will assume 5% of the risk, and the SBA will guarantee the remaining 80%.

Typically, a 504 project includes three elements: a loan (or first mortgage) secured with a senior lien from a private-sector lender covering up to 50% of the project cost, a second mortgage secured with a junior lien from a Certified Development Company (backed by a 100% SBA-guaranteed debenture) covering up to 40% of the cost, and a contribution of at least 10% equity from the small business borrower.

Under the new program, portions of the senior liens are pooled by pool originators and sold to investors in the secondary market. To be eligible to be included in a pool, the first mortgage must be associated with a 504 loan disbursed on or after February 17, 2009. The program will be in place until February 16, 2011 or until $3 billion in new pools are created, whichever occurs first.

The pool originators approved so far are

• Bank of America, N. A. of New York, New York;
• Cantor Fitzgerald & Co. of New York, New York;
• Citizens Bank of Elizabethton, Tennessee;
• Coastal Securities, Inc. of Houston, Texas;
• Community South Bank of Knoxville, Tennessee;
• Fidelity Bank of Covington, Georgia;
• Meadows Bank of Las Vegas, Nevada;
• Morgan Stanley Bank, N.A. of Salt Lake City, Utah; and
• Voyager Bank of Eden Prairie, Minnesota.

Need an SBA loan right now?  Please call George Blackburne III at 574-360-2486 or email him at

Topics: SBA 504 loan, SBA loan, 504 loan

Non-Recourse Commercial Loans

Posted by George Blackburne on Thu, Jun 24, 2010

Most Commercial Mortgage Loans are Recourse Loans These Days

Normally when you borrow money, you have to pay it back; but this is not true of a non-recourse loan. If a non-recourse commercial real estate loan goes bad, the commercial lender cannot go after the borrower personally. The lender's sole recourse is to attach the rents and then foreclose on the property.

A recourse loan is just the opposite. Suppose a commercial real estate lender makes a $10 million commercial loan, and the loan goes bad. The commercial lender forecloses, but it still loses $2 million when the property goes to a Sheriff's Sale. If the loan is a recourse loan, the commercial lender that just took a $2 million haircut can attach the assets of the borrower. It can attach the debtor's wages, foreclose its lien on the debtor's house, and foreclose on other properties owned by the debtor. It can seize the debtor's expensive cars, his boat, and his valuable stamp collection. The debtor promised to pay, so he has to pay.

Is a recourse loan the same thing as a personal guaranty? They are close, but they are not exactly the same thing. If a loan is a recourse loan, the commercial lender can go after the debtor for any deficiency judgment. However, the debtor might be a corporation or a limited liability company. In this case, the commercial lender can go after the assets of the corporation or the LLC that used to own the commercial property, but it cannot go after the assets of the investors in the corporation or the LLC.

However, if the commercial lender also obtained a personal guaranty from each of the major investors in the corporation or the LLC, then the commercial lender could indeed go after the wages, the home, the other real estate, and the expensive toys of the personal guarantors.

Before the Great Recession, conduits originated about half of all commercial real estate loans. These conduit loans were non-recourse. Unfortunately, the commercial mortgage-backed securities (CMBS) market collapsed under the weight of the sub-prime crisis, and all conduit lending ceased. As of today, conduit lending has not restarted. As a result, few remaining commercial lenders will make non-recourse loans.

Life companies will make non-recourse loans, but they simply don't make many loans, and the loans they do make are very, very conservative. Few life companies will make commercial mortgage loans today much higher than 55% loan-to-value, and their minimum loan is often $5 million.

Most commercial real estate loans made today by banks are recourse loans. Personal guaranties are also required on most commercial loans from banks.  However, if the loan is large and the collateral is very, very desirable, banks will sometimes make non-recourse loans.

Few hard money lenders will make non-recourse loans, but Blackburne & Sons will make a non-recourse loan for a slightly larger fee, if the loan is highly desirable. Need a commercial loan that is non-recourse? Please call George Blackburne, III (the old man) at 574-360-2486 or email him at

Topics: non-recourse loan, personal guaranty, recourse loan

Commercial Lenders Are Dwindling

Posted by George Blackburne on Mon, Jun 21, 2010

Only Three Kinds of Commercial Lenders Are Left

Do you need to find some commercial lenders right now? You can submit your commercial mortgage mini-app to 750 different commercial lenders in just four minutes using And C-Loans is free!

Before the Great Recession, there were eight different kinds of commercial lenders - life companies, conduits, commercial banks, savings and loan associations (S&L's), mortgage REIT's, finance companies, thrift & loan associations, and hard money lenders. Today all but three of these classes of commercial lenders are kaput.

  1. Life companies - The life companies were always the most conservative of the commercial lenders. They seldom made loans higher than 55% to 60% loan-to-value. As a result of their great caution, this class of commercial lenders is still standing. Life companies make about 10% of all commercial loans, but their loans are much larger ($5 million minimum) and much more conservative than the rest of the commercial lenders.
  2. Conduits - Off all commercial lenders, the conduits were the most active. A conduit was a mortgage company that originated and inventoried fixed rate commercial loans for eventual sale to the commercial mortgage-backed securities market. At their zenith, they were originating over 50% of all commercial mortgage loans. Unfortunately in 2008 the secondary market for CMBS loans evaporated. Poof. It disappeared completely. No conduit loans are being originated today at all. This class of commercial lenders has disappeared off the face of the earth.
  3. Commercial banks - The largest surviving class of commercial lenders are the commercial banks.  Banks will still make commercial loans, but at much lower loan-to-value ratio's and only to very strong borrowers.
  4. Savings and loan associations (S&L's) - S&L's were once very active commercial lenders. Today very few S&L's even survive, and those that did survive are not active commercial lenders.
  5. Mortgage REIT's - Even before the Great Recession, mortgage REIT's were not huge commercial lenders. I can think of only two surviving mortgage REIT's, and neither makes more than a handful of commercial loans annually. Essentially mortgage REIT's no longer exist as a class of commercial lenders.
  6. Finance companies - Finance companies borrowed their money from the bank at prime plus 1% an relent that money on riskier, complicated loans at prime plus 7%. Virtually all of the finance companies making commercial loans are now bankrupt.
  7. Thrift & Loans Associations - Not to be confused with S&L's, thrift and loan associations were a special kind of bank in California whose deposits were NOT insured by the FDIC. In the early 2000's, most of these commercial lenders failed. The rest converted to federally chartered savings banks.
  8. Hard money lenders - Private lenders will always make commercial loans. It's just that when private investors get scared, the rates goes up. A great many mortgage funds are being wound down, but hard money lenders are still exist as a class of commercial lenders.

Do you need to find some commercial lenders right now? You can submit your commercial mortgage mini-app to 750 different commercial lenders in just four minutes using And C-Loans is free!

Topics: commercial lender

Commercial Financing with a Credit Tenant Lease (CTL Financing)

Posted by George Blackburne on Tue, Jun 15, 2010

Bed Bath BeyondIf you have a credit tenant and the lease is triple net, CTL Financing terms are much, much better than conventional commercial loan terms.

If you are an investor with a prime property leased on a triple net basis to a credit tenant, you can still get terrific commercial financing. (If you need CTL or any other commercial financing right now, please write to me, George Blackburne III - the old man - at




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A credit tenant lease is a method of financing real estate. The landlord borrows money to finance the property and pledges as security the rents to be received from the tenant. Usually, the financing is structured as nonrecourse debt, and the lease is structured as a triple net lease.  Credit tenant leases may be created either in sale/leaseback transactions or new purchase transactions.

A credit tenant is typically a national company that is rated BBB or higher by Standard & Poors. Examples of national credit tenants include Walgreens, CVS Pharmacies, Petco, Auto Zone, Bed Bath & Beyond, Advance Auto Parts, Lenscrafters, FedEx Kinko's, etc.


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Credit Tenant Lease Financing (CTL) is available to borrowers for acquisitions, refinances or the construction of a variety of property types that are tenanted by Investment-Grade rated tenants on long-term Bond, NNN, or ground leases. Acceptable property types include Single Tenant Retail, Corporate Office, Industrial (warehouse distribution) and US Government leased properties.

Loans range in size from $3 million up to $300 million or more on single properties or large multi-property portfolios. Minimum debt service coverage ratios range from 1.0x to 1.05x. Surprisingly, there are no traditional restrictions on the LTV; however, the loan-to-value ratio must not exceed 100%.


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These CTL loans are made on a fixed rate basis at a market spread over matching United States Treasuries (UST's). The loan term will often, but not always, match the term of the underlying lease (coterminous).  What this means is that if there are 18 years left on your credit tenant lease, lenders will sometimes - but not always - amortize their loans over 18 years.  

"But George, won't the short term of the loan making the monthly payments much too large?"  You would think so, but the interest rate on CTL loans are soooo low that most deals cash flow comfortably. 

If you need CTL or any other commercial financing right now, please write to me, George Blackburne III - the old man - at  I get 1,300 emails per day (really), and I don't want to miss your email.  Would you please make the Subject Line read, "CTL Financing"?  Thanks!


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Topics: credit tenant financing, credit tenant loan, CTL financing, CTL loan, triple net lease financing

USDA Commercial Loans and Mixed Use Properties

Posted by George Blackburne on Thu, Jun 3, 2010

Will the USDA Guarantee Commercial Loans Where There Are Some Residential Units on the Property?

USDA commercial loans are terrific deals, if a commercial property qualifies. Certainly motels, hotels, restaurants, office buildings, retail buildings, strip centers and industrial buildings qualify.

However, apartment buildings do NOT qualify. The purpose of a USDA commercial loan is to promote the growth of businesses and industries in rural areas. Mere rental housing is not considered a business or industry for the purposes of this program.

But what about a mixed use property, such as apartments over several storefronts? You'll find a great many mixed use buildings in the center of most older towns. Do these properties qualify for a USDA commercial loan?

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I asked this question of a USDA commercial lender. Here is his response:

[There is no blanket rule. Each property would be looked at on a] case by case basis, depending on the amount of mixed use. Some state offices are more open to it than others. Generally, the residential component has to be small compared to the rest of the project. If the residential portion is more than 50% [of the total square footage or scheduled rents], it would not work.

Need a USDA commercial loan right now? Please call Tom Blackburne at 574-210-6686 or email him at

Topics: USDA commercial loan, USDA commercial lender

USDA B&I Loan Rates and Terms

Posted by George Blackburne on Wed, Jun 2, 2010

So What Do B&I Lenders Typically Charge on a Rural Commercial Loan (Business & Industries Loan)?

Do you need a commercial loan on a motel or other commercial property located in a rural area? (Unfortunately apartments don't qualify for a B&I guarantee.) Are you ready to get started right now? Please call Tommy Blackburne at 574-210-6686 or email him at

What do Business and Industries loans typically cost?

Rate: Prime + 2.75% to Prime + 3% floating, readjusted quarterly (as of 6/2/10 the prime rate was 3.25%, so we're talking about a floating rate loan between 6.0% and 6.25% today). If the deal is really strong and the property is NOT a special use property, it might be possible to get Prime + 2.50%.

Floor: 6.5% Higher if the deal is weak.  Please note that this makes the floor higher than the nominal rate (Prime + 2.75%), so the loan would start out at 6.5%. The margin over prime would therefore only become relevant if the prime rate increased, which many economists would argue is somewhat unlikely in the near term.

Ceiling: None.

Points: 1-2 to the lender plus 1-2 points for your mortgage broker.

Amortization: 25 years fully-amortized.

Prepayment penalty: Minimum of 5% for five years.  The lender might agree to a slightly lower rate if the borrower agrees to a 10% prepayment penalty for ten years that declines by 1% per year.

Assumability: The loan documents are usually silent on the subject, giving the lender the flexibility to allow an assumption for a strong buyer of the business or to deny the assumption. The original borrower usually remains secondarily liable.

Do you need a commercial loan on a motel or other commercial property located in a rural area? Unfortunately apartments don't qualify for a B&I guarantee.) Are you ready to get started right now? These USDA business and industries loans are a terrific deal. Please call Tom Blackburne at 574-210-6686 or email him at

Topics: USDA B&I Loan, USDA Business and Industries loan

USDA B&I Loans Commercial Property Eligibility

Posted by George Blackburne on Wed, Jun 2, 2010

Does Your Commercial Property Qualify for a USDA B&I Loan?

Need a USDA B&I loan? In order for your commercial loan to qualify for a guarantee from the U.S. Department of Agriculture, it needs to be located in a rural community. Normally this means a town of less than 50,000 people.

However, a great many cities in suburbia have a population of less than 50,000 residents, but these suburban cities are far from small rural towns. They sit right next to population centers with hundreds of thousands of people. Therefore they are not the type of small, rural community that needs help getting commercial financing.

To see if a property is eligible for a USDA B&I loan go to the following website:

When the page comes up, click “I Accept”. It will take you to a map and you type in the address completely. You have to make sure that the address has street, city and zip code. This is essential. It will then bring up a map and tell you automatically if the property is eligible or ineligible.

Need a USDA business and industries loan (B&I loan)? Please call Tom Blackburne at 574-210-6686 or email him at

Topics: business and industries loan, USDA loan, B&I loan

More on USDA Business and Industries Loans (B&I Loans)

Posted by George Blackburne on Tue, Jun 1, 2010

You Can Use a USDA B&I Loan to Refinance a Ballooning Loan

You will recall from earlier articles that a USDA Business and Industries Loan (B&I Loan) is a terrific program if your commercial property is located in a town of less than 50,000 people. The B&I loan program is a government guarantee program similar to that of the SBA, and it is intended to help businesses in rural areas.

Can you use a B&I loan to refinance a balloon payment? The answer, surprisingly, is yes!

Do you need a commercial loan on an income property located in a small town? Please email a brief description to Tom Blackburne at or call him at 574-210-6686.

Topics: USDA loan, B&I loan