The Feds May Slow Down Commercial Real Estate Lending With New Regulations
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Seeing that many of the smaller community banks across the country are starting to carry a heavy concentration of commercial real estate loans on their portfolios, federal regulators are planning on raising their capital requirements to moderate the risk. What this may mean to those investing in commercial real estate is that it will be harder to borrow money for commercial properties.
If this happens, expect to see a slowing of the commercial real estate market just as large parts of the country are experiencing a slow down in the residential marketplace and higher interest rates.
To identify whether a bank’s portfolio is becoming overly dependent on commercial real estate loans, the guidance sets thresholds: Banks with construction or development loans totaling 100 percent or more risk-based capital would have what regulators call a potential concentration. Banks with construction, multifamily housing and commercial real estate loans totaling 300 percent or more also could be overly dependent on such loans.
If these thresholds are met or exceeded, a bank would need heightened risk-management practices, such as establishing clear risk standards, increasing oversight by their bank boards, having adequate capital and reserves, and planning for downturns, says Bill MaGrini, senior project manager at the Office of Thrift Supervision.
About one-third of all U.S. banks meet the thresholds laid out in the guidance. But FDIC Associate Director of Policy Steve Fritts is concerned that banks haven’t installed the information management systems and management techniques they need.
Thus, the need for the guidance, he says: “We wanted to make sure that as banks grew, they had the tools to grow the commercial real estate business line.”
Commercial real estate concentrations prompt federal guidance - Orlando - MSNBC.com.
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The only people holding off will be those that are financially secure and can manage to hold off. How ...
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post ... very interesting. 
