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Looking Beyond Uncertain Commercial Lending Modalities...

by  | Corporate
Posted:     Updated: Oct 19, 2017  0:57 ET
 
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Lending and borrowing, like other financial markets, fluctuates daily. In similitude, there is ebb and flow that predict future lending activity and performance of commercial mortgages.

About the general direction of the market, while none can predict-with absolute certainty, how financial markets respond, economic indicators allow real estate speculators to make market projections and determinations. When analyzing the loosening or tightening of commercial mortgage markets, there are key parameters affecting availability, origination and structure of mortgage loan funds.

LENDING FROM ALTERNATIVE SOURCES

Traditional banks and other conventional institutions, that specialize in commercial mortgage backed securities, have reduced commercial mortgage loan approval. Moreover, associated with the Dodd-Frank Act, these institutions are preparing for further regulation. For instance, at end of fiscal year 2017, in lieu of selling bundled commercial mortgage derivatives and transferring mortgage risk on the open (stock) market, this Act requires lenders retain or service 5% of its new commercial mortgage portfolio. Bottom-line, for potential borrowers, obtaining a commercial mortgage is inherently more difficult. This difficulty encourages real estate speculators to seek funding from alternative means; i.e. Private Equity Firms or REIT fund managers.

IMPACT OF INTEREST RATES

According to the Department of the Treasury, the Federal Reserve has incrementally increased interest rates. While economic trajectories trend upward, due to higher loan sizes, an interest rate increase impacts commercial mortgage lending. With an interest rate increase, one expects fewer commercial mortgage loan approvals. Still, higher interest rates routinely constrict economic growth. Yet, rising interest rates-to include cessation of quantitative easing-indicate economic growth.

Regardless of economic trajectories, trends or pending regulations, commercial mortgage funding remains available. These trends affect institutions that service loans-to include the level of difficulty associated with obtaining a commercial mortgage. Within traditional lending, regulatory mandates have greater impact. However, these mandates have less influence on private equity lenders. Still, during the decision-making process, in identifying profitable commercial enterprises, both traditional lending modalities and private equity firms observe real estate market indicators.

For value added service and conversation, contact: 800-759-7593 or submit lending inquiries and scenarios via: www.lucevfinance.com; lucevfinance@aol.com

Topics: Commercial economy | Commercial lending
More by: LUCEV Finance & Investment Group

 

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Looking Beyond Uncertain Commercial Lending Modalities...

by LUCEV Finance & Investment Group | Corporate
Posted: Oct 19, 2017  0:55 ET    Updated: Oct 19, 2017  0:57 ET

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