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Regulations and rates are chief concerns of CRE lenders

On Behalf of | Jan 25, 2017 | Real Estate Law |

Many commercial real estate developers and investors in Ohio and around the country had a fairly good year in 2016, and most experts feel that prices will remain healthy and the market will be stable in 2017. However, there are some concerns over interest rates and regulations that could have a significant impact on the commercial mortgage backed securities market.

The U.S. Federal Reserve announced a quarter point interest rate increase in December 2016, and financial experts are anticipating at least one more rate hike in the year ahead. However, few commercial real estate experts feel that a modest rise in interest rates will have much of an influence on lending. More than $500 billion was made available by lenders to commercial property borrowers in 2016 according to the Mortgage Bankers Association, and the fear of higher rates could actually prompt the holders of maturing debt to act more quickly than they otherwise would have. Almost $400 billion in commercial property loans are scheduled to mature during 2017.

However, regulations that require CMBS lenders to keep 5 percent or more of the loans they make are more of a concern for analysts. Several of the larger CMBS lenders have tightened up their underwriting standards in anticipation of the rule, and experts fear that many smaller lenders will choose to leave the market rather than comply with it. CMBS financing is a crucial piece of the commercial real estate lending landscape, and those involved in high-leverage transactions may find money hard to come by if these securities become increasingly hard to obtain.

Making a mistake when choosing a financing package can be disastrous for property developers, but attorneys with real estate law experience may be able to help them to make prudent choices by comparing the terms and checking the references of the lenders involved. Attorneys could also help developers to avoid ruinous delays caused by legal issues such as missing or incorrect permits and land use or zoning disputes.