Even Small and Regional Commercial Banks Have Cut Back Sharply on Commercial Real Estate Loans
As the sponsor of the C-Loans Commercial Mortgage Lender Databank, we have our fingers on the pulse of the commercial real estate lending market. The CMBS lenders started to die late last year and now they are not lending at all.
Most of the mega commercial banks got crushed in the subprime residential lending debacle. Their balance sheets are so underwater that they are making at most 2% of their 2007 volume of commercial real estate loans. Essentially the mega-banks are out of the market.
Until this last week, however, the smaller banks were still making some commercial real estate loans. We were greatly disturbed last week, however, when several smaller commercial banks - lenders with no exposure to the subprime crisis - contacted us and confided that their balance sheets were so troubled that they too had stopped making any commercial real estate loans.
We are pretty sure that this is a trend that will continue among the surviving small and regional commercial banks. As their commercial loans to local industrial companies start to go bad (sales of widgets and other industrial products are cratering), soon most commercial banks will stop making commercial real estate loans completely - even permanent loans on standing commercial properties.
If any of your "A" borrowers are delaying their plans to pull equity out of their commercial properties, tell them that this is the last call for commercial loans from banks. If they don't close their loans in the next 90 to 120 days, they may have to wait five to ten years before commercial loans with decent interest rates reappear.
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