We are now nearly 5 months into 2008 and who would have known that there would be so many problems with the banking industry and an individual's ability to close a commercial loan refinance. Many banks and lenders have simply stopped quoting rates and a few have already gone out of business. Depending on which banks you talk to, their seems to be a real sense of fear on how and when this is going to straighten up.
Of course borrowers that are trying to deal with their own situation and complete/close their commercial loan refinance are to a degree, at the mercy of the greater markets. Some borrowers, with gray hair, bring up the Jimmy Carter days when Prime was in the 20%'s. A few have elected to refinance out of their current loan to get into longer fixed rate financing in an effort to better prepare themselves even though they incur prepayment penalties and the like.
Confusion
Besides the banks and lenders that have taken the brunt of it (that either held a large amounts of subprime securities or that were direct portfolio lenders in the residential subprime business) there seems to be a real level of confusion among banks that are in decent positions to lend. It seems all loan details are up for scrutiny and evaluation. Meaning what does the bank want to lend on? Do they still want hotels, restaurants, retail, etc? What about geographical markets, are they still looking at deals in the Midwest, for example?
Guidelines like loan to value and debt coverage ratios have been tightened pretty much across the board but less obviously guidelines like what vacancy and or management fees used for underwriting seem to be up for grabs as well.
Rates have been another issue that is worth noting. Normally the differences in rates between one bank and another is around .3 %. Meaning if one lender quotes 6% than the highest rate on the next quote would be around 6.3%. We have seen differences as high as 2.5% on the same transactions, which is pretty much unheard of in the industry.
For borrows looking at their refinance this can be pretty confusing as the media is talking about fed rates being lowered and residential lenders are advertising "historic lows". The issue here is the difference between secondary CBS lenders vs. traditional portfolio lenders that receive their capital primarily from deposits.
The state of the market is frustrating to all involved, not just the borrower trying to get there commercial loan refinanced.
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