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Show Me the Money
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May 08, 2013
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Lending standards for commercial real estate loans are on par with the industry’s last expansion cycle in the mid-2000s according to the Federal Reserve’s quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices. Moreover, demand from qualified borrowers is slightly stronger now than in the last expansion. In the just-released April survey, 21% of bank loan officers reported easing standards over the prior quarter, and 40% reported stronger demand from borrowers. Commercial real estate loan delinquencies (30 days past due), which peaked at 8.75% in the first quarter of 2010, declined to 4.13% in the fourth quarter of 2012, according to a separate Fed study. Banks have worked through much of their backlog of non-performing loans – taking back properties, selling loans or negotiating with borrowers. After four years of declining commercial real estate loan balances, banks became net lenders in the fourth quarter of 2012, a trend that continued into the first quarter of 2013 with loan balances at domestic banks expanding at a seasonally adjusted annual rate of 0.6%. Banks and thrifts account for just over one-third of outstanding commercial real estate loans, and many other lenders are active in the industry. But the return of banks, which are among the most closely regulated of lenders, signifies the improving health of commercial real estate market fundamentals.
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