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October 2011, Update for Commercial Mortgage Market

Financing for commercial loans, less than $10,000,000, remains fragil/scattered, as most lenders still refuse to aggressively lend (or cannot due to strict federal regulations).   Fear of a 2nd recession clouds the future and slows momentum that was built earlier in the year. 

Despite the continued gloom, there are bright spots.  For example commercial mortgage rates remain at historic lows.  Also interestingly, we’ve seen a small, but continued drop in 10 fixed rates compared to the more common 5 year fixed programs, which have increased slightly in the last 3 weeks (10 basis points or so).  Also, for us internally, we continue to get full commitments on loans in less than 5 business days for conventional loans (Need to be less than 65% loan to value to qualify).

 

SBA loans are another major bright spot in the market, for owner users that need high leverage financing (Up to 90% loan to value).  The reason is of course that the government backs these loans, which creates major benefits for both the borrower and banks. 

Future

If the European Union is not able to come with real solutions to their financial crisis it will surely have a major negative effect on our banking system and commercial lending.  Borrowers are strongly encouraged to take advantage of the current historic low rates and complete any refinances or purchases that they are currently considering.  If the banking sector was to fall apart even at a fraction of what it did in 2008, than it will likely be another 2 or 3 years before lending returns to its current levels.