Commercial Lending

Loan Applications Rise as Rates Fall Again

Loan applications continued to increase last week as mortgage rates decreased, according to the Mortgage Bankers Association weekly mortgage applications survey.

The market index rose 4.3 percent to 514.4 last week from 493.1 the previous week on a seasonally adjusted basis. On an unadjusted basis, the index increased 15.3 percent compared with the previous week and was down 2.7 percent compared with the same week a year ago.

The refinance index was up 17.7 percent while the purchase index decreased 9.4 percent compared to the previous week. More than half of applications were for refinances.

* 30-year fixed-rate mortgages decreased to 5.05 percent from 5.34 percent;
* 15-year fixed-rate mortgages decreased to 4.59 percent from 4.83 percent;
* 1-year ARMs decreased to 6.47 percent from 6.58 percent.

Source: Mortgage Bankers Association (07/15/2009)

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Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222 ext. 26
Blog: elliottonrealestate.com
Twitter: elliottrob@twitter.com

Commercial Lending

Freddie Mac Calls for Appropriate Comparables

A July 10 lender bulletin from Freddie Mac says appraisers “must be familiar with the local market,” select “appropriate comparable sales,” and certify them as “most similar” to the property in question.

The bulletin also says appraisers are not required to use distressed properties in their comparable sales analyses unless they represent a good number of the properties on the market.

The bulletin is in response to the new Home Valuation Code of Conduct, which is being criticized for causing a shift among lenders to appraisal management firms outside the local market and for weakening home sales.

Source: Inman News, Matt Carter (07/14/09)

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Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222 ext. 26
Blog: elliottonrealestate.com
Twitter: elliottrob@twitter.com

Commercial Lending

Office Market in Bad Shape

Nearly 16 percent of offices in the U.S. were vacant in the second quarter, the highest rate in four years. Rents fell by the largest amount in seven years, according to research firm Reis Inc.

“It’s bad,” Reis’ Director of Research Victor Calanog says. “It’s decaying and getting worse. Given the depth and magnitude of the recession, you can argue that we are facing a storm of epic proportions and we’re only at the beginning.”

Reis confirmed its previous prediction that the U.S. office vacancy rate will top out at 18.2 percent in 2010 and for rents to continue to fall through 2011. It expects the default rate to peak at 5.2 percent in 2011.

Source: Reuters News, Ilaina Jonas (07/07/2009)

——————–
Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222

Commercial Lending

Distressed Commercial Real Estate Tops $97B

The total value of distressed commercial real estate reached $97.8 billion in June, doubling every three months since December 2008, according to a new report from Delta Associates.

Foreclosures of commercial mortgages reached a 3.2 percent delinquency rate in the first quarter of 2009, up from 1.8 percent in the first quarter of 2008.

Retail properties represented the largest segment of distressed mortgages at $29.7 million.

Source: Washington Business Journal (06/26/2009)

——————–
Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222

Commercial Lending

Small Business Lending Gets Much Needed Help

The American Recovery and Reinvestment Act was passed to give small business owners much needed access to capital.  Within this Act, the Small Business Administration (SBA) has been given $730 million, leniency in their fees and increased guarantees to encourage financial institutions to begin lending.

Increased Loan Guarantees

To assist the lending community, the SBA has increase the amount of their loan guarantee from 75% to 90% of the loan amount.  This is significant because it lowers the bank’s exposure in the instance of a default while making the loans attractive for sale on the secondary market.

Eliminated SBA Fees

The new act also allows the SBA to waive their standard fees.  Under the 7(a) program, the fee can range anywhere from 2% – 3.75% of the loan amount guaranteed by the SBA.  The fee percentage varies based on the amount of the loan guarantee.

An example of the impact on potential borrowers: A $300,000 loan with a 75% guaranty would have a guarantee fee of 3%. With the temporary elimination of SBA fees, you would save $6,750.00 ($300,000 x 75% x 3%). Under the new 90% guaranty your savings would be $8,100 ($300,000 x 90% x 3%).

The application fee for the 504 program is being waived.  That fee is 1.5% of the loan guarantee amount.

The program is slated to last until December 31, 2009 or until the funds are exhausted.

7(a) Program

Typical 7(a) borrowers are entrepreneurs looking to start, expand or acquire a small business. In many cases, the applicant may have a strong business idea, management ability, and sound financial projections, but may have a shortfall in collateral to secure a loan or equity to put into the business.  The maximum loan amount for a 7(a) loan is $2 million.

In order to qualify for a SBA 7(a) loan, borrowers must be unable to secure conventional commercial financing on reasonable terms and be a “small business” as defined by SBA size standards. In 2008, of the $18 billion in SBA backed loans, 35% went to start-up businesses, nearly 32% ($5.7 billion) went to minority owned businesses, and nearly 23% went to women owned businesses. The most frequently financed industries in 2008 were services, retail trade, accommodation/food service, construction firms, and manufacturing.

504 Program

Aimed at Certified Development Companies, these loans offer growing small businesses long-term, fixed-rate financing for major fixed assets, such as land, buildings and machinery and equipment. These loans are aimed at fostering community development, creating jobs and encouraging modernization.

Other provisions of the Act

Microloan Expansion: Provides extra funding for loans and technical assistance to SBA backed microlenders

ARC Stabilization Loans: Offers 100% guaranteed deferred payment of loans up to $35,000 to help viable small businesses facing immediate economic hardship make payments on existing qualifying loans

Expanded 504 Refinancing Project: Allows borrows to refinance an existing eligible loan as part of a new 504 small business expansion project.

Surety Bond Program Expansion: Allows more small businesses to compete for contracts by raising the maximum amount for contracts that qualify for SBA surety bonds to $5 million and up to $10 million for certain contracts.

SBIC Program Expansion: Increases the maximum levels of funding that SBA can provide to SBICs.

Secondary Market Guarantee for 504 First Mortgages: Provides liquidity to lenders by allowing SBA to guarantee 504 first mortgage pools sold into the secondary market.

7(a) Secondary Market Lending Authority: Increases liquidity in the secondary market for SBA loans by directly lending money to brokers to purchase SBA 7(a) loans.

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Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222

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