Bottom line, Wall Street?s seems unable to distinguish between the residential subprime mortgage mess and any other mortgage back securities ? like commercial mortgages.
It?s widely agreed that that Wall Street and the credit ratings agencies have simply overreacted and commercial lenders such as Lehman, Bayview, Silverhill, Interbay, and Velocity have fell victim to ?guilt by association?.
All involved in the small balance arena are feeling the pinch ? lower loan to values, increased debt coverage ratios, increased interest rates, etc. Brokers and borrowers have been push around with constantly changing guidelines, and unfortunately for many ? changing guidelines while their loan was in process. But defaults rates on CMBS loans continue to hover at some of the lowest levels in the history of the business. Commercial mortgages have been underwritten soundly. Even the so called stated income loans have been underwritten by the properties ability to service its debt via market rent.
Regardless of the logic by Wall Street, the current solution for many borrowers is to go back to the basics ? portfolio lenders that get their capital from deposits. These sources are not restricted by the ups and downs of the secondary market, though they certainly are not perfect. The main draw backs are the traditional loan programs that they normally offer; such as the classic 5 year fixed 20 year amortization loan.
On the bright side, many traditional lenders do have some of the best rates and lowest prepayments penalties in the business. And if the borrower looks hard enough they can find some interesting creative loan programs. For example there are a few traditional banks that offer 25 year fixed loans, credit scores as low as 550, and 90% financing is still very much an option for owner occupied facilities.
Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan. He specializes in Commercial Real Estate Loans between $400,000 ? $5,000,000. Offers unique loan programs such as Commercial Second Mortgages, Commercial 30 Year Fixed and 90% non SBA financing, Commercial Equity Lines. 248 885-8797 or at SBA 7a Loan and commercial real estate loans
Source: http://refinance.maxmoneymarketing.com/debt/commercial-mortgage-lenders-current-credit-crisis/
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