A bill has been proposed in Congress that could provide much needed support for community banks doing their best to continue commercial real estate lending. It could also go a long way toward stabilizing the commercial real estate market by providing a long-term financing and refinancing solution missing since the conduit market went dormant in our area.
The Commercial Real Estate Stabilization Act of 2010 (H.R. 5816) proposes a governmental guaranty for bonds backed by commercial real estate loans conforming to standardized underwriting guidelines. This is a similar concept to the existing HUD program for providing insurance on multifamily properties but will extend to other property types. You might think of it as a government-backed conduit program that should also help to jump-start the private conduit market in smaller metro markets.
Fifty percent of the program will be reserved for small and mid-sized financial institutions (banks with less than $10 billion in assets), and the maximum individual loan size will be $10 million. The proposed loan terms look to be a bit more conservative than existing permanent multifamily loan programs or the conduit terms of years past; but it is a start and, if passed, should have a positive impact on commercial real estate markets and the local financial institutions that support the industry. It specifically addresses the needs of community banks rather than just the larger institutions.
Industry groups including the National Association of Realtors and the Conference of State Bank Supervisors have gotten behind the proposed act. This is a bill to be watched because of the beneficial impact it could have on Louisiana markets.
More information on the bill can be found at the Library of Congress website here.
(Brian Andrews is a certified mortgage banker specializing in the financing of commercial real estate. His business is Andrews Commercial Mortgage and he can be reached at brian.andrews@acmla.com.)
