Mortgage Banking

Making sense of commercial real estate finance.

Archive for April, 2008

Is The Bottom Near?

Posted by Jordan Crouch on April 28, 2008

  • ECONOMIC NEWS: The price for crude oil is now nearing $120 a barrel. Several large corporate acquisitions made headlines; Microsoft attempting to buy Yahoo is still on going, Mars (candy bars) and Warren Buffett are acquiring William Wrigley Jr. Co (Juicy Fruit, Wrigley’s) and a little closer to home Safeco is being bought by Liberty Mutual. The most anticipated earnings report this week is from Visa, which IPO’d last quarter. Overall, the markets are up today. Stimulus checks begin going out this week with the hope that they will stimulate the economy. With the housing market still in the dumps and credit card balances growing, the stimulus package will probably not be enough to “save” the country from recession.
  • LENDING MARKET: The Federal Reserve meets this week and will lower the Fed Funds rate. Many see this as the last time the rate will be lowered as credit market conditions are showing signs of stabilizing. There are also concerns that continuing to lower the rate will devalue the dollar more and increase inflation. Banks will be most affected by the Fed rate drop, making it easier for the banks to lend money. Life Insurance Companies (and the non-existent CMBS lenders) won’t have much reaction to the lowering Fed Funds rate unless the rates on Treasury Bills move significantly. T-Bill rates have not moved much since last week, most likely due to the upcoming Fed meeting
  • FINANCE TERM OF THE WEEK: Debt Service Coverage Ratio (DSCR) The ratio of net income divided by the annual debt payment. It determines the ability to meet and exceed annual debt payments. Typically 1.25 or higher is needed for a loan. (See this article for more information.)

Posted in Capital Markets | Leave a Comment »

Small Balance Apartment Lenders

Posted by Jordan Crouch on April 24, 2008

There used to be three main lenders for apartment loans in the $500,000 to $3M: WaMu, Countrywide and World Savings. Any apartment loans in the size range not done by the top 3 were handled by local banks, a few life insurance companies, several CMBS lenders and Fannie Mae’s small loan program.

Countrywide is no lending for the foreseeable future. WaMu is tentatively lending and World Savings (which is owned by Wachovia) has slowed its production. This leaves more apartment owners looking to those other lenders for new avenues of financing.

Michael McQuaid, a local Seattle Apartment broker recently posted his insights on the subject. Check out his post in its entirety here. Below are some highlights, all of which I agree with:

  • The typical client… went to [WaMu, World Savings, or Countrywide] because anyone else was at least one-half percent higher on the rate with total fees 3X to get the loan.
  • We should anticipate much longer processing times and much more expensive loans as the “new” lenders are going to insist on several third party reports that we have not had to supply to the previous three sources.
  • Environmental reports, structural reports, and surveys will be necessary and rates will be higher, meaning loan amounts will be lower as well.

the appetites of lenders are changing daily. Check here frequently to follow the lending markets volatility.

Posted in Capital Markets, Lenders, Seattle Real Estate | 1 Comment »

The Safeco Situation

Posted by Jordan Crouch on April 23, 2008

It was announced today that Liberty Mutual is acquiring Safeco Corp. What does that have to do with commercial real estate in Seattle? Actually, a lot. Safeco recently sold its headquarters near the University of Washington to move its operations to downtown Seattle. The company leased 424,000 square feet in the CBD. With such a large chunk of the available market leased at once, downtown office vacancies sank, lease rates rose and several new office developments commenced construction. The opposite will likely happen if Liberty Mutual decides to downsize some or all of Safeco’s space. So far, there has been no word on layoffs; hopefully that will not happen.

Other interesting notes about Safeco:

  • The Mariners play at Safeco Field. I would imagine that the stadium would not change its name.
  • Spun off Symetra Financial in 2004. (Full Disclosure: Symetra is one of the lenders we represent.)
  • Safeco’s downtown headquarters, Safeco Plaza, is locally known as ‘the box the Space Needle came in’.

Posted in Random, Seattle Real Estate | 2 Comments »

Five Things for Monday

Posted by Jordan Crouch on April 21, 2008

  • Crude oil price spikes to $117 a barrel today after it is reported that a Japanese oil tanker is attacked off the coast of Yemen.  (I’m not making this up). Crude continues to climb after surpassing the $100 per barrel mark earlier this year.
  • Bank of America’s quarterly report was lower than expected this morning dragging the bank’s stock price and the market down accordingly.
  • The interest rate on a 10-Year Treasury bill is climbing, up 25 basis points from last Monday.  The yield is near the highs of February, which was the highest yet for the T-bill this year.
  • No major economic data coming out this week. Look for earnings reports from AT&T, Microsoft, Apple, Delta and others in the next few days. Depending on how the reports turn out, the market will likely follow.
  • Two Saturdays ago it was a sunny 70 degrees. Last Saturday I had two inches of snow on my lawn! What is up with this weather?

Posted in Capital Markets | Leave a Comment »

How to get a Construction Loan in the Current Lending Market

Posted by Jordan Crouch on April 17, 2008

1. Buy your lender lunch

2. Send your lender flowers

3. Send your lender candy

4. Offer to wash and wax your lender’s car

5. Work with a mortgage banker and

he can do steps 1-4 for you.

Pretty funny, but somewhat true in today’s lender oriented market. I wish I could say this was my idea but someone else used it at a presentation yesterday.

Posted in Capital Markets, Lenders, Random | 5 Comments »