COMMERCIAL REAL ESTATE LOANS

 

COMMERCIAL REAL ESTATE LOANS AND THE U.S. BANKS

A recent survey of commercial real estate property investors and real estate agents draws a very clear picture of what the main body of U.S. banks is NOT DOING. 

They are NOT making loans to buyers and owners of commercial properties.  So what the heck was TARP all about?  Was not one of the primary purposes of that hundreds of BILLIONS of taxpayer dollars spent intended to have banks make loans again to their customers?  No one seems to think that there was any differentiation between ‘subprime’ residential loans or ‘commercial property loans’.  So, what are the banks waiting for?  Why are they holding back on the commercial real estate industry?

Investors and agents are very frustrated.  They almost universally believe that this policy is going to bring about a second meltdown, only this time in the ‘commercial’ sector, vs. the residential sector.  They believe that this could be as devastating as the most recent residential foreclosure drama.  Increased unemployment could follow plus an extended negative business climate long into the future. 

We all know that the dealings between the Feds and the banks and between banks themselves are far more complex than the average citizen can comprehend.  Everyone knows that the government is printing and borrowing money at a rate never before witnessed in America.  Everyone knows that the government is not running their house like the average American ‘tries at least’ to run their own homes.  Banks are offering up a huge amount of ‘lip service’ but nothing more.   Very few loans have been made in the commercial arena since Tarp!

Yet, some banks are not only foreclosing on their customers but raising their interest to extraordinary new heights.  One bank in Burlingame has increased the borrower’s interest rate to 12%, notified the office building tenants to send their rent to the bank and have literally treated their own customers like they were the enemy.  This bank is acting as if they were Chicago strong arm gangsters! We are talking about an excellent twenty thousand square foot office building in a prime rental location, and where the market rate for rent has dropped from $2.50 SF to $1.50SF.   A prominent bank executive in response to this fact stated:  “Of course, it is now a risky loan”  Hello? So the bank forces the owner into foreclosure ends up with the property as an REO or scheduled item and exacerbates their own banking problems.  Then they turn around and ‘dump’ the property at a $500,000.00 loss.  Their better move was to help the owner hold on to the property during the drop in market rate rents and postpone interest for a few years.  This way, no one loses.  So what’s with this ‘risky loan’ business?  Are they really this stupid or do they have an ‘agenda’?

Is there any place that these unfortunate borrowers can turn?  They are the victims of a changed market, yet in this specific instance, the owner’s loan was current while the sister building owner, joined by a common breezeway was in default on their loan payments.  So why attach the owner’s rents wherein their loan was current? 

We’ll how about this idea?  The bank was bailed out by Tarp.  Taxpayers across America were informed in part that the citizens of America would be responsible for the Tarp funding so that banks could start lending again to their customers.  But the banks are NOT making loans or helping borrower with existing loans.  Let’s see this aggrieved owner/borrower file a law suit against the bank for ‘breach of good faith’, ‘detrimental reliance’ or some cause of action demanding that the bank deliver on their implied promise to help their customers with their mortgage problems?    When did they make this ‘implied’ promise to their customers?  They made it when they accepted the Tarp bail out money!

Might be a very interesting bit of litigation and who knows, could result in new law that would force the banks to help their customers rather than whatever it is they have done and are doing with their receipt of Tarp money.    

It is being reported that banks are using devious methods to appear to be trying to make loans while basically throwing up spurious barriers to keep loans from happening.  The most recent methodology is to use APPRAISERS to do their ‘dirty’ work.  They promise loans; go through all the paper work and then assign their own appraisers to evaluate the property.  The appraisals are coming in below the value needed for the loan.  Deal dead!

So where is that courageous building owner and attorney who is going to challenge the system and possibly bring in a victory that will force the banks to play it straight. 

WWW.NDAXI.COM                          August 30, 2009

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