Law Office of

HENRY B. LaTORRACA

Civil Trial Attorney

Regulators say banks must manage CRE lending risks

| Aug 10, 2016 | Uncategorized |

Commercial real estate investors have had more access to funding in the past couple of years as banks have increased their lending and loosened their underwriting standards. However, all of this lending could expose banks in California and around the country to more risk, and banking regulators are worried. In July , the Office of the Comptroller of the Currency told banks to do a better job managing their risks in commercial real estate lending.

In an interview, Comptroller Thomas Curry said that banking regulators were flashing a yellow warning light for commercial real estate lending. The OCC warned banks to be vigilant about managing their risk in commercial real estate lending as lending practices like interest-only payment periods and longer loan maturities were creating dangerous conditions.

Large banks have increased their lending over the past couple of years. From 2014 to 2015, lending growth increased from 3.6 percent to 5.9 percent. Loan portfolios at small banks have also grown, and small banks are increasingly focused on commercial and residential real estate loans. According to the OCC, easier underwriting standards must be accompanied by risk management planning. Curry said that he believes that if banks act now, potential risks can be mitigated.

A commercial real estate investor may be able to get better loan terms with representation from an attorney. An attorney may also be able to represent the investor during the purchase process. If there are any title disputes, construction litigation issues or problems with the zoning of a property, an attorney may be able to help a real estate investor to settle these conflicts outside of court.

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