The Window Is Closing for Subprime Commercial Borrowers!871944803186


Inform your auto repair mechanic, your favorite restaurant owner, and the owner of your pool cleaning service that it's last call [http://www.mcgrawrealtors.com/ homes for sale tulsa ok] for subprime industrial loans.  I predict that the subprime industrial mortgage loan marketplace will shrink by 75% within six months.  If these modest organization owners are ever going to pull some equity out of their commercial buildings to tide them through the coming recession, it may possibly be also late if they don't apply in the next couple of weeks.

The way that Wall Street lenders, like Bayview Monetary (a fine firm and excellent pals of ours), raise their lending capital is to securitize their subprime commercial loans.  They put the loans in a huge pool.  They assign the pool of loans to a trust.  The trust problems bonds backed by the loans in the trust.

Then investment bankers sell these bonds into the Asset-Backed Securities (ABS) industry.  In addition to subprime industrial loans, credit card debt and vehicle loans are also typically sold as ABS bonds.

The issue is that the buyers of these ABS bonds are now requiring massively larger yields.  I study in Bloomberg yesterday that the purchasers of AAA-rated ABS bonds are presently demanding yields that are a full 2% (200 basis points!) larger than they were just eight months ago.  The appetite for ABS bonds is clearly waning.

In addition, Wall Street subprime industrial lenders are also being forced to decrease their loan-to-value ratios.  For example, Silverhill Financial not too long ago lowered its high-LTV system from 97% to just 85% loan-to-worth.

These alterations are a warning that the market place for ABS bonds may possibly be drying up.  If Bayview, Lehman Brothers and the rest of the Wall Street subprime industrial lenders all of a sudden dial back their programs, the comparatively tiny challenging funds industrial lending firms will be unable to manage the overflow.  Subprime commercial mortgage lending could largely dry up, and it could take place really swiftly.

Therefore you want to tell the owner of your preferred coffee shop and your auto body repair guy that if they are ever going to attempt to borrow against their buildings, they far better do it now!