MBA Reports Increases in Commercial Loan Originations
Editor’s Note: This is an exciting sign for the commercial real estate industry. After a 2+ year decline in loan originations this is big news. This is the looming problem that people are looking at to see if it is going to really put it to the regional banks that have large exposure to this type of commercial paper. I know a large player in this space and he was elated to hear this news and he has seen a pickup in business so that could be a bight spot. Lets keep cautiously optimistic.
The Mortgage Bankers Association (MBA) reported on Tuesday that commercial mortgage originations were at a higher level during the last quarter of 2009 than in either the previous quarter or in the 4th quarter of 2008, but multifamily originations continued to lag. The data was part of the MBA’s Quarterly Survey of Commercial/Multifamily Bankers Originations.
CapitalSource posts $274 million loss citing commercial loans
Editor’s Note: Most interesting piece of this news piece is that they increased their commercial loan loss reserves by over 100% . This tells me they are anticipating many more losses going forward from their commercial loan inventory.
Business Journals, Washington D.C.:
The company’s $221 million third quarter loan loss provision, which it set aside to cover loans that may have to be written off, was double the $110 million loss provision it posted a year ago.
“Despite declining charge-offs [compared to the second quarter], we increased our general provision for commercial loan losses this quarter in light of continuing stress in our commercial real estate portfolio,” said John Delaney, CapitalSource chairman and CEO in a statement.
The company’s overall assets were $14.2 billion, down 23 percent from the beginning of the year.
Source: Business Journal
Regulators give guidence to banks on troubled commercial real estate loans
These banks are going to need to start restructuring these deteriorating commercials loans or risk defaults and even larger write-downs. That will lead to the FDIC stepping in and closing the bank. I am surprise the banks are not lobbying Congress more loudly to get a program in place to refinance these loans.
The problem I assume that are making the commercial banks reluctant to restructure these loans are the fact that they were written at a higher level of valuation and if they have to rework the commercial loan to a lower valuation, the bank will need to write down their capital and that would in effect lower their capital reserves and would bring them closer to being in a situation that the FDIC would close them down.
This is why I am more convinced that once our regulators are ready to confront this problem, they will create a government sponsored program to refinance these commercial loans and in effect that would bring them off the balance-sheet of these commercial banks without making them a much higher risk of being shut down.
Even the regulators in the press release said even though there are signs of sectors in the economy recovering, it remains fragile.
PNC Bank CEO: Commercial Loan Troubles Are ‘Just Beginning’
Editor’s Note: They are just the beginning, all these financial products are connected in some way so when there is a serious decline in one of them, they all are affected. Since the start of this blog, I have been touting that commercial loans are the next shoe to drop and guess what, its a dropping.
News (Dow Jones):
The head of a Pittsburgh regional bank delivered a dark forecast for the U.S. economy on Wednesday, even as he touted his own firm’s ability to weather the financial crisis.
Commercial Loans the next trouble spot for banks?
This is the next shoe to drop in our global financial crisis. Right along with the residential real estate bubble that happened across the globe, the commercial real estate bubble expanded. A buddy of mine who has been a commercial mortgage banker for decades said that over the next 3-4 years, we will see many commercial loans coming due for refinancing. With the banks and other financial institutions reeling from subprime and derivative losses, it looks like we will have much more supply on the market than able lenders. I have heard rumblings that the U.S. government might have a bailout program in the works for the commercial real estate.
News:
Commercial loans are the next potential trouble spot for banks nationwide, and especially for those doing a lot of business in Michigan.
Banks with large presences in the state have seen increasing write-offs in commercial lending, and one sector analyst looks for that trend to continue.
Brian Klock analyzes Comerica for Keefe, Bruyette & Wood, and said nonperforming commercial loans are catching his attention.