Regulatory reform helps banks make commercial real estate loans

On Behalf of | Jul 11, 2018 | Commercial Real Estate |

The first quarter of 2018 saw a relaxation of lending standards at banks in regards to commercial real estate loans. The standards set for banks in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act restricted the ability of banks to grant loans to commercial property investors. Financial analysts expect the rollback of some of these restrictions to create opportunities for commercial property owners in California to refinance their loans.

A chief economist at JLL Capital Markets said that the increased flexibility for banks should not inspire a large bump in new lending activity, but more borrowers might look at their refinancing options now. When the Federal Reserve Bank surveyed senior loan officers, responses indicated that banks were easing their lending terms for construction and land development, multifamily buildings and loans for nonfarm and nonresidential buildings.

Bankers view the regulatory reforms as a chance to improve their chances of competing with alternative lenders like debt loan providers and mortgage REITs. The leader of JLL Capital Markets said that those alternative entities were not subject to the same regulations as banks. Since the passage of Dodd-Frank, they had gained market share because of their freedom to take greater risks.

A transaction involving commercial real estate generally involves many factors. Legal advice may enable a person to make effective decisions or resolve problems when buying, selling or financing a property. An attorney might propose strategies for fixing title problems or enforcing liens. An attorney’s research may help expand a person’s understanding of financial options, such as venture capital or asset-based lending. The person could gain a legal perspective on loan terms and investor agreements before committing to a deal. When possible, an attorney may be able to negotiate terms that limit the person’s exposure to liability.

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