Mortgage Banking

Making sense of commercial real estate finance.

Rate News

Posted by Jordan Crouch on May 5, 2008

  • ECONOMIC NEWS: Microsoft called off negotiations with Yahoo, leaving the market to end on a low note today. As expected, the Federal Reserve lowered the Fed rate to 2% last week. As concerns grow over inflation, most experts anticipate the Fed to not make another rate cut. Inflation is most easily seen in the price of oil which is now $120 a barrel.
  • LENDING MARKET: The 10 Year T-Bill yield remains above the 3.80% range, which is 40 basis points higher than one month ago. Spreads have lowered slightly but overall rates are still in the 6.25% to 6.75%. Lenders’ appetites remain the same: quality assets with low leverage and little lease-up risk. The biggest problem lately is that debt service coverage is constraining loan dollars.
  • FINANCE TERM OF THE WEEK: Yield Maintenance –A prepayment penalty that requires a borrower to pay a lump sum equal to the present value of the outstanding interest payments of a loan. Each lender calculates this differently; it be anywhere from 0 to 10% of the loan amount.

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