The New Year will bring new rules for the commercial real estate lending sector, which faces unprecedented regulatory pressure from risk-retention rules that could fundamentally change the way the CMBS market has operated in years past. Both the existing and upcoming rules are already affecting the lending sector and will continue to do so throughout the year.
Early last year, rules governing commercial real estate loans went into effect, increasing the risk of certain acquisition, development and construction loans that banks might write. The banks, which hold nearly one-third of the United States’ commercial real estate loans, have reduced their lending activity. “This is good for the shadow-banking market,” said Eagle Group Finance President Brian Good. Based on the fact that many banks are only providing financing against projects backed by their best customers, he believes it’s creating a void that lending companies like his are trying to fill.
These new rules would also impact single-asset CMBS deals. However, many industry professionals are seeking modifications that would relax the rules when it comes low-risk loan deals. While no evidence has surfaced, industry professionals have grown cautious of Congress and its pursuit of additional tax revenue, which could result in targeting exchanges as potential cash.