The commercial real estate industry is potentially in for some significant changes in 2017. Not surprisingly, many of these potential changes are due to the election of Donald Trump and the expected shift in the legal landscape and the economy. It isn’t known yet, of course, exactly what changes will be occurring for the industry, but experts had noted an increase in non-bank lending before Trump’s election.
Big banks deal in commercial mortgage-backed security loans, which are loans secured by primary mortgages on commercial properties, but these transactions have been slowing down. On the other hand, non-bank lending has been on the increase.
Part of the reason for the increase in non-bank lending, according to experts, is the heavy requirements of the Dodd-Frank Act, the law passed in the wake of the financial crisis. Dodd-Frank made lending requirements more rigorous, opening up alternative, lower cost options.
Non-bank lending institutions are different from big banks in a number of ways: they very often offer cheaper rates; have more relaxed lending criteria; lower fees; and more flexibility in working with borrowers. Because they are smaller, though, they also tend to be more vulnerable to economic downturns and typically have fewer products and services available to borrowers.
On the regulatory side, non-bank lenders has fewer requirements. Because of this, borrowers considering working with a non-bank lender should be cautious about entering into an agreement and should explore all their options. An experienced attorney can help look out for a borrower’s interests, and can protect his or her rights when something goes wrong.
Interest rate changes may also impact the commercial real estate lending market in 2017. In December, after the election of Donald Trump, the Federal Reserve raised interest rates by one quarter of a percentage point, which could reduce new property transactions.
In our next post, we’ll continue looking at some of the changes that may be in store for commercial real estate lending, and also the value of working with an experienced real estate attorney to navigate commercial real estate lending transactions.
Forbes, “5 Commercial Real Estate Trends To Watch In 2017,” Ely Razin, Dec. 22, 2017.
Inman.com, “Big banks cede market share to nonbanks,” Octavio Nuiry, Nov. 1, 2016.