J.P. Morgan’s commercial real estate head is ready to lend

by LJ Miehe on March 28, 2011

Editor’s Note: This may be a sign that better times are on the way.  I still believe that we still have a very major correction in the economy coming with all this debt still loaded in.   But, for the forseeable future, we should see improvement in the economy and the more pronounced this recovery is, the more banks are going to be willing to lend and get back to good times.  With this said, the banks will still be only doing the best deals that have the highest percentage of successfully paying back the commercial loan.

Nasdaq – Todd Maclin, J.P. Morgan Chase & Co.’s (JPM) commercial-banking head, saved the bank from the commercial real-estate crash by pushing J.P. Morgan to sharply cut back on lending while competitors made ” crazy” loans. Now Maclin has had a change of heart.

J.P. Morgan is lending again to commercial real estate. Vacancies are falling and rental rates are rising, driving demand for new loans. And much of the competition still can’t stomach the idea of making new loans, allowing J.P. Morgan, along with Wells Fargo & Co. (WFC) and PNC Financial Services Group Inc. (PNC), to provide new loans with little competition.

“There hasn’t been a lot of new development and activity,” Maclin says. “That has led to some improvement” in lending terms.

The commercial real estate collapse was “the dominant reason for the high number of bank failures since the beginning of 2008,” the Federal Reserve’s director of banking supervision and regulation, Patrick Parkinson, told Congress recently. While Parkinson said worst-case scenarios appear less likely than last year, he warned banks aren’t even halfway through losses.

In some states, there’s a moonscape of empty office parks, rental complexes and craters in the ground. Nearly 10% of commercial real-estate loans are delinquent.

From 2005 to 2009, national commercial real-estate loans outstanding grew 55% to over $1.7 trillion. Wells Fargo, and Wachovia Corp., which Wells bought, were consistently the top originators, according to the Mortgage Bankers Association.

J.P. Morgan shrank. From 2004 to 2007, the commercial bank slashed its real- estate exposure from about $20 billion to about $7 billion.  Speaking in early 2008, Maclin explained that real estate can generate high returns and “above average problems.”  Maclin, who sits on the bank’s operating committee advising Dimon, now says his team was avoiding “crazy” underwriting.


Previous post:

Next post: