theory is great, reality is even more telling.
case in point: today, we have ridiculously low interest rates, the federal government has provided plenty of capital to lenders to make loans, printed plenty of money, and yet loans for commercial property are not being made.
why would there not be liquidity in the capital lending market for a borrower who is looking to finance/refinance performing commercial properties?
because the lenders have instituted strong (some borrowers are calling them "draconian") standards that require the borrower to a) have at least 30% equity (70% LTV) and b) agree to full or partial recourse.
are these really "strong" or "draconian" lending standards?
no. they are the very type of standards that existed in the past, as recently as a decade ago when banks and insurance cos made these loans, it's just that borrowers became addicted to the loose standards that became prevalent in the last 5-6 years as the cmbs industry reared its ugly head.
so reality is proving the availibility of capital isn't going to provide and supply stupid loans, stupid lenders and idiot borrowers (read the entire article that was linked above)are the key and necessary component.
the government IS printing trillions of dollars, and the fact is the loans are NOT being made.
|