Conventional Commercial Mortgage Lenders are not Lending

The liquidity crisis in the collateralized mortgage bond market has forced banks and big institutional lenders to take themselves out of the game. Conventional lenders just aren't lending. Many very good deals are being turned away by lenders who would have fought over them just 12 months ago. The secondary market was their source of lending capital, if they can't raise cash in the secondary market they have no money to lend.

Privately Funded Commercial Mortgage Loan Applications are way up

Commercial real estate investors are now turning to private funding sources to secure the funding they need. Applications are flooding into hard money shops, hedge funds and private equity firms. With so many great projects to pick from, hard money commercial mortgage lenders and the top commercial mortgage brokers have the luxury of being extremely choosey. The demand for capital is so great that opportunistic funding sources, like private lenders, are aggressively raising the rates they charge and increasing the origination points they require.

Investors and developers are desperate for funding and those lucky enough to get loan commitments will have to pay-up for them. Hard money funds for the most financially sound deals start at about 12% with at least 2 lender points. This time last year, the best deals were being priced at 9.99%. Deals with problems and projects sponsored by developers with weak balance sheets are being passed over or priced in the stratosphere.

Private, "hard money" is now main-stream business. Even the wealthiest investors and biggest developers are now looking to private funding sources. The private lenders will fund the cleanest deals with the best borrowers first, and who can blame them.

If you are looking for a hard money commercial mortgage, bring you're "A" game. Be prepared to invest a good percentage of cash into the deal, make sure it has plenty of protective equity in it, have a viable exit plan and be ready for interest rates in the mid-teens.

Good deals are still being funded; there is hope for the experienced investor with an exceptional piece of property and some money in the bank. But, like anything else, financial capital is a commodity; price is a function of supply and demand. Demand for privately funded commercial mortgage loans has never been higher so, inevitably, the cost of hard money is up.

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