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Banks Increasing CRE Lending; Bond Spreads To Widen

February 8, 2010

Sentiment at the Mortgage Bankers Association meeting last week in Vegas showed improvement. More banks are not only willing to lend, but their threshold for risk and size is also increasing.

That readiness to restart was reflected in a separate survey of 60 banks and other lenders at the Mortgage Bankers Association’s annual conference in Las Vegas last week. Of those surveyed for Jones Lang LaSalle, a commercial real estate services firm, 24 said they would make $2 billion to $4 billion worth of commercial real estate loans each this year.

The Jones Lang LaSalle survey indicated that 56% of the lenders surveyed were willing to lend $50 million or more toward purchase of a single property. Last year most respondents were willing to lend only up to $25 million to buy an asset.

We’re seeing evidence of this on the ground as well with loans getting done on deals which even six months ago would have been impossible to do.

Rates are pretty favorable given where the LIBOR levels area today, but there is a good chance that spreads should begin to widen again as credit risk looms in the market and pushes spreads on competing bond classes up.

[via WSJ]

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