Banks across the Nation and in Texas Commercial Lending Institutions are Tightening up Their Underwriting Standards

4page_img3-bigBanks across the nation and in Texas commercial lending institutions are tightening up their lending standards for commercial real estate loans. Developers, builders and investors are turning to private hard money lenders in order to secure the funding they seek in the time and amount that they require.

The Texas banking system has noted that they have some “balance sheet concerns.” This is due to lending concentrations in construction, commercial real estate, oil and gas, as well as agriculture. They are presently monitoring commercial real estate. Some banks are looking to expand their portfolio with good, strong borrowers while others have noted increasing risk-taking due to increased competition in the current low interest-rate environment leading to loose standards and less monitoring of properties and markets. In many instances, Texas commercial lending institutions with high commercial real estate loan ratios have begun tightening their underwriting standards.

According to the Federal Reserve Senior Loan Officer Opinion Survey, numerous banks have reported tightening standards for construction loans and for loans secured by multifamily units. Even investors in office, industrial and hospitality properties have seen increasing difficulty in obtaining funding from these traditional Texas commercial lending banks. This includes the tightening of the loan-to-value and debt-service coverage ratios. One of the main concerns is the number of commercial real estate loans that were funded in 2006 and that will now be looking for refinance options.

Part of this tightening also stems from global concerns as the recent name calling on the worldwide political stage has left uncertainty. These banks are then choosing to limit their commercial real estate portfolios to existing lenders, thereby decreasing their exposure to risks of the unknown. If you’re looking to obtain your first commercial or construction loan, developing a working relationship with one bank or lender can help you in times of increasing regulations or tightening Texas commercial lending structures.

Time to Funding and Amount of Capital

Increasing restrictions has led to a longer time to funding as well as a diminished amount of capital. In the current environment, matching the right project to the right lender ensures adequate funding in a timely manner. After all, a lender that understands the time constraints of construction or renovation also understands the need for capital when it is required which, in the long run, increases the ROI and provides for a stable base of operation.

As loan volumes and amounts decrease, contractors, developers and investors are turning to hard money lenders for their financial needs.

At Level 4 Funding, we work with hundreds of private hard money lenders, many of which prefer to invest in specific commercial real estate markets. This leads to a good working relationship with knowledgeable lenders and borrowers that work together for the common good. The truth is, it takes decades to build a rolodex such as ours and create the trust that leads to continued working relationships between lenders and borrowers. Many developers and contractors in commercial real estate return to us time and again for their loans because they know that we will do our best to connect them with the right lender that offers the best rate.

Dennis Dahlberg
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177 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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