California real estate developers might want to be aware of the fine that has been levied against Deutsche Bank by the U.S. Department of Justice. The Justice Department announced that it is fining the bank $14 billion for its actions in offering residential mortgage-backed securities prior to the housing bubble burst of 2008.
The bank is one of Europe’s largest, and it is also one of the biggest foreign originators of commercial real estate loans in the U.S. Deutsche Bank also is one of the largest issuers of commercial mortgage-backed securities. The move by the federal government could lead it to draw down on its offerings and limit the loans that it offers.
Other banks that are heavily involved in the commercial real estate loan business may also react by taking heightened care when extending offers of financing for development projects. A bank spokesperson stated that Deutsche Bank would work to negotiate a settlement far lower than the fine announced by the government. It reportedly has $6 billion in reserves for litigation, which is far short of the fine amount.
If the commercial real estate lending market tightens, it could be difficult for developers to find sources of financing for their projects. Those who are in the planning stages for a new project or who need additional financing for a project that has already commenced might want to consult with a commercial real estate attorney. Legal counsel could advise the client about possible alternative sources that may exist, such as crowdfunding platforms that are becoming increasingly popular as financing mechanisms.