Commercial Mortgages Transform - Jan 2007 update
Below is a MRR and PLR article in category Finance -> subcategory Other.
Commercial Mortgages Update - January 2007
Overview
In recent times, many commercial lenders have closed, been acquired, or filed for bankruptcy. Here's a summary of how these changes are influencing commercial lending in California.
Current Landscape
Numerous commercial lenders are effectively no longer operational, creating a surge in loan applications that has strained our appraisal and processing systems. Some competitors have stopped accepting new loans to manage this overload. However, we are committed to handling the increasing number of loans while maintaining competitive rates.
Policy Adjustments
For larger loans, particularly those over $3 million, we are focusing on solid apartment and commercial properties with strong borrower profiles. To ease processing delays, we are temporarily not considering loans for properties like hotels, gas stations, or those with environmental concerns, as well as borrowers with poor credit.
For loans over $3 million, we require traditional, straightforward properties with no complicating factors. Borrowers must meet strict criteria, including a minimum credit score of 680, an adjusted net worth 150% greater than the loan amount, and personal debt ratios under 40%.
Loans below $3 million offer more flexibility. We can consider a broader range of properties and borrower profiles and will assess offsetting strengths and weaknesses, which we won’t do for larger loans.
Market Trends
As the economy shows signs of weakening, we are increasing Debt Service Coverage Ratios: 1.20 for residential properties and 1.25 or higher for commercial.
Current Offers
While it's unclear how long it will remain available, we continue to offer a 90-day rate lock at no cost to borrowers. A 0.5% rebate, up to $15,000 per transaction, is also included.
Our latest rate sheet is enclosed for your review, and I am available to discuss transactions. For loans above $3 million, reliable financial data from borrowers is essential, though initial discussions can proceed without complete documentation.
Loan Processing and Timing
Expect loan processing to take 60-90 days. We cannot accommodate rush transactions for the next two months. It's crucial to inform borrowers about extending their closing dates. For 1031 exchanges, ensure all parties agree with these timelines.
Looking Ahead
The shortage of quality lenders and market uncertainty will eventually stabilize. Until then, we're dedicated to meeting your financing needs. Wishing you all the best for the New Year!
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