Commercial mortgaged-backed securities debt is on the rise though lower loan-to-value ratios have been adapted. Private hard money lenders are stepping in to fill the gap.
Good news for real estate investors and developers—commercial mortgaged-backed securities (CMBS) debt showed a moderate increase in the second quarter of 2017. Capital from alternative lenders is partly responsible for this considerable jump. According to Forbes, “CMBS issuance jumped in Q2 to $38.8 billion year-to-date, well above the $30.7 billion in CMBS debt issued at the same period last year.”
The decline in 2016 may have been, in part, due to the risk retention rules, mandated by the Dodd-Frank Act that went into effect on December 24th. These rules require originators to hold a piece of the deal on their balance sheets—at least 5 percent of the value of the loan—in order to keep some “skin in the game.” Immediately following, underwriting standards tightened leading to less interest-only loans and lower leverage as lenders in the CMBS market took some time to get use to the new regulations. It appears that the CMBS market has adapted to the new rules as June showed CMBS lenders issuing 451 loans that amounted to $12.3 billion—twice the amount in loans issued in any other month this year.
Some of the effects of this ruling are still apparent such as banks adapting lower loan-to-value ratios. Alternative lenders are stepping in to fill this gap. Private hard money investors who were once known as last-option lenders for borrowers are now lending amounts that correspond with some of the nation’s largest banks. And the demand continues to grow with borrowers looking for capital in order to take on new projects and others seeking to refinance maturing debt.
Private Hard Money Loans as an Alternative Commercial Mortgage Lender
Gone are the days when private hard money loans were solely viewed as quick capital to obtain while waiting for a traditional loan to come through. In this day and age, that may be a very long wait. While these types of loans are still used for this purpose, they have also become common capital infusers for real estate developers and investors looking to jump on a prospective property, starting ground-up construction or renovation funds. Private hard money can be obtained quickly, in as little as two days, and does not require the stringent credit scores that applies to traditional lenders.
Private hard money loans are a practical source of funding for real estate investors and developers.
We, at Level 4 Funding, have been in the business for 20 plus years. We’ve seen the rising regulations and ridden through the subprime mortgage crisis. We help professionals obtain the most difficult commercial mortgage approvals at the best possible rates. We also offer bridge loans to both commercial and residential clients. Our short-term private hard money bridge loans range from 3 to 12 months while commercial loans can be extended to 5 years. Call us for a no-obligation quote. You’ll know the answer in as little as 24 hours.
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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