Commercial Real Estate Financing Bill

By
Commercial Real Estate Agent with KW Commercial

There is a bill (HR 5249) proposed by House of Representatives Ed Perlmutter and Mike Coffman to provide small banks with assets of less than $10 billion to amortize their commercial real estate losses over a 7 year period.  It is known as the ‘Capital Access for Main Street Act of 2010'.  This is a step to assist small banks with the impending losses they are due to receive as commercial real estate continues to depreciate. Unlike traditional residential financing with fixed 30 year loans, it is more common to see commercial loans with maturity dates within of 5 to 10 years of their origination.  It has been stated that there is an estimated $1.5 trillion in commercial loans maturing in the next 3 to 5 years.  With an average loss in value of 30% to 40% from the time the loan was originated, it is easy to see that highly leveraged properties equate to huge losses for the owners and lenders. 

What impact could this bill have on commercial lending?  If passed, the intent of this bill is to free up significant amounts of capital for commercial real estate lending.  But according to Erika Morply in Globest.com, there are a number of critics of the bill's positive impact for small banks ability to lend. Cards stacked against the bill's effectiveness include current regulatory policy, the likelihood that small businesses may jump to the front of the line as dollars are made available and commercial real estate is still viewed as too risky for the small banks.

While this bill may not be the ultimate answer to saving many small banks and proving much needed capital to the commercial real estate market, I applaud the efforts of Perlmutter and Coffman in working to find a solution.  It is a far cry better than the impact of the FDIC closing down a community bank.  The collateral damage to the business owners and developers with loans of the failed bank is catastrophic.

 

 

 

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Joe Sosky is the Managing Director for KW Commercial in Vancouver, Washington, as well as a developer of NNN leased properties.  Give me a call if you have a client who may want to buy, sell or lease a Commercial or Investment property.  Each month we teach people how to become a Millionare Real Estate Investor.  Our Workshops are held in Downtown Vancouver on the 3rd Tuesday of each month!  Email info@jtsinvesting for more information!

Joe Sosky; Commercial Real Estate Associate Broker and Investment Specialist
KW Commercial
360-816-9652
joe@kwcommercial.com

 

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Lending / Financial
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Washington Clark County Vancouver
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commercial real estate financing reform

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Rich Cederberg
eXp Realty - Albuquerque, NM
eXp Realty Agent Albuquerque

Thanks for bringing this to my attention. We are waiting for the other shoe to drop, aren't we? Maybe this would help.

May 22, 2010 06:17 AM #1
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Paula McDonald, Ph.D.
Beam & Branch Realty - Granbury, TX
Granbury, TX 936-203-0279

Hmmm.  We shall see.  I am with you in that I am not sure of the outcome of this as the commercial lending market is still quite lean.

May 22, 2010 06:40 AM #2
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Respect Realty LLC
Respect Realty LLC - Milwaukie, OR
Brokers - Oregon / SW Washington Real Estate

This is great news! It is so hard to get commercial loans right now and maybe this will help. Don't need to see higher unemployment when so many great ideas are out there for business, but no one will give these people a chance to buy the buildings they need to get things going or to let exsisting businesses grow.

May 22, 2010 03:13 PM #3
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Joe Sosky

Commercial Real Estate Broker - (360) 816-9652
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