Banks to ease CRE lending standards

Loans for commercial real estate should be easier to come by in the coming months.

It's starting to get easier to acquire a mortgage loan for commercial property, according to The New York Times.

Nearly 22 percent of banks surveyed by the Federal Reserve Board in October stated they had eased third-quarter credit standards for commercial real estate loans. Meanwhile, just 2.7 percent reported they were tightening standards.

Kelly King, chairman and chief executive officer of BB&T Corp., which is based in Winston-Salem, N.C., told Bloomberg that competition for commercial real estate lending has been fierce.

"Everybody's going after loans wherever they can find them," King said. "We have an appetite to increase our CRE, but we do not have an appetite strong enough to take on too much risk at the extraordinarily low prices."

The New York Times reported that banks are receiving more queries about commercial real estate loans than any time since 1998, and the net loosening figure posted in third quarter was at 19.9 percent. While that's down slightly from the second quarter, it's otherwise still the highest such level seen since 2005.

"It is somewhat anecdotal, but it feels like we've seen a consistent increase in availability of debt capital in commercial real estate this year," Ross Smotrich, a senior analyst of real estate investment trusts for Barclays, told The New York Times.

A year prior, Smotrich told the Times, "the banks were willing to lend to highest-quality borrowers, but recently there is more interest in lending" on lower-quality properties.

He added that demand began to escalate in cities such as New York, Boston and San Francisco, and now has started to snowball into other markets.

Results from the Federal Reserve study
A study from the Federal Reserve revealed that banks are easing lending policies particularly for commercial and industrial loans, but they are also loosening standards on prime residential mortgage loans in the third quarter as the demand for home loans cools, according to Bloomberg.

"Monetary policy in the United States is likely to remain highly accommodative for some time," said Jerome Powell, the Fed Governor, according to Bloomberg.

The Federal Reserve plans to inspect how the largest banks might conduct business if a surge in long-term interest rates arises alongside another housing crash. The Fed said 12 additional banks will join the 18 banks being previously tested in regards to a capital review.

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