Quick funny: Tomorrow is the National Home-School Tornado Drill. Lock your kids in the basement until you give the all clear. You’re welcome. Haha!
For the past two weeks, we have been discussing the fact that just about every commercial bank in the country is out of the commercial mortgage market.
The CMBS market remains broken for now too, although the Fed’s recent purchase of billions of dollars worth of commercial mortgage-backed securities has helped to prevent a complete collapse of the CMBS market. CMBS lenders will likely survive to lend again in a year or so.
ABS lenders are also out of the market. You will recall that ABS stands for asset-backed securities, which are smaller securitizations of an eclectic collection of debt obligations. An ABS pool might contain subprime auto loans, scratch-and-dent residential loans that have been kicked out of some regular securitization pools, aircraft loans and leases, equipment loans and leases, credit card loans, movie residuals, and non-prime commercial loans.
As a result of recent huge declines in the value of asset-backed securities, ABS commercial real estate lenders; like Silverhill, Velocity, and Cherrywood; are now out of the market right now.
We also discussed how several hundred commercial hard money lenders nationwide are either out of the commercial loan market or have completely closed their doors. The slaughter has been particularly bloody among those hard money shops that use a mortgage pool to fund their loans.
As soon as the coronavirus crash started, most of their private investors lined up to withdraw their money from these hard money mortgage funds. This left these hard money shops with no new money with which to lend. Suddenly they had zero loan fee income coming in, so they didn’t have enough money to make payroll and to keep their doors open.
Bottom line: When a borrower goes out searching for a commercial loan today, he is going to get turned away by just about every lender.
Isn’t this wonderful?! As a commercial loan broker, you make your dough helping borrowers find commercial lenders. When every bank in the country was making commercial loans, most borrowers didn’t need you. Now they do.
Commercial real loan officers, working for banks, are telling their prospective borrowers, “I’m sorry, but our bank is not making any new commercial real estate loans right now.” In other words, the bank is out of the market.
I can also tell you that, after having survived the S&L Crisis, the Dot-Com Meltdown, and the Great Recession, most commercial banks are going to remain out of the market for several years. Whenever banks bolt to their hidey-holes, they come out very, very timidly.
Those of you who have read and understood my articles about how the Multiplier Effect can sometimes work in reverse should be able to understand the huge deflationary pressures building in the U.S., as well as China. You may not want to go “all-in” on the stock market, even though Gilead Sciences announced last night that their new therapeutic drug for the coronavirus is doing very well in a large trial. That huge deflationary tidal wave from China is still coming. Chinese small business owners have been traumatized, and a new drug does little to immediately restore their savings accounts.
You think it’s bad now? In 20 years, our country will be run by people home-schooled by day drinkers…
Since banks are turning down every new commercial borrower, it is therefore an incredible time to call bankers for their commercial mortgage turndowns. The bankers will be grateful to have someone – anyone – to service their frustrated clients.
It also makes good sense to also tell these bankers that you will not be taking their good customers to some competing bank. “All of your bank competitors are out of the market too.” Tell them that you have some reasonably priced private money with no prepayment penalty.
Make sure you gather the contact information on every commercial real estate loan officer working for a bank that you meet. You can trade each bank commercial loan officer for either a free commercial mortgage underwriting manual, a free loan broker fee agreement, a free commercial mortgage marketing course, or a free regional copy of The Blackburne List containing 750 commercial lenders.
These trades are made under the Honor System. Please don’t cheat. You can trade trade a banker for ONE of the above four goodies. If you want all four goodies, please find me four bankers.
And this guy must work for a bank or credit union. ABC Bank. First National Bank. Helloooo? Banks have huge metal vaults with tens of thousands of dollars in cash on hand, right? Mortgage companies are NOT banks. You are not a commercial loan officer working for a bank. You can’t fill in your own name. Nice try. Sorry.
When this is over, what meeting do I attend first… Weight Watchers or AA?
Have you ever coveted my famous, nine-hour course, How to Broker Commercial Loans? I will give you this course for free if you gather up twenty commercial real estate loan officers working for banks for me.
But where do you go to find these bankers to call? Simple go to Google Maps and type in your office address. In the Nearby field, type in “Banks”. Voila!
Since we can’t eat out, now’s the perfect time to eat better, get fit, and stay healthy. Hellooo? We’re quarantined! Who are we trying to impress? We have snacks, and we have sweatpants. I say we use them! 🙂
Commercial Mortgage Rates Today:
Here are today’s commercial mortgage interest rates for permanent loans from banks, SBA 7a loans, CMBS permanent loans from conduits, and commercial construction loans.
Be sure to bookmark our new Commercial Loan Resource Center, where you will always find the latest interest rates on commercial loans; a portal where you can apply to 750 different commercial lenders in just four minutes; four huge databanks of commercial real estate lenders; a Glossary of Commercial Loan Terms, including such advanced terms as defeasance, CTL Financing, this strange new Debt Yield Ratio (which is different from the Debt Service Coverage Ratio), mezzanine loans, preferred equity, and hundreds of other advanced terms; and a wonderful Frequently Asked Questions section, which is designed to train real estate investors and professionals in the advanced subject areas of commercial real estate finance (“CREF”).
By George Blackburne