Commercial mortgage market liquidity must be enhanced

This week, GRRA CEO Mike Barr and 2010 GRRA President Bill Guill are in Washington, D.C. talking with our representatives about several different issues. This is part of a series of in-depth looks at issues that affect the housing market in Greensboro and around the country.

Congress must take action to enhance liquidity in the commercial real estate market to avoid driving down economic recovery.

Liquidity challenges

Despite providing more than 9 million jobs and generating billions of dollars in federal, state and local tax revenue, the commercial real estate market is still in the midst of a serious financial crisis. Many property owners are underwater, and will face serious trouble refinancing the $1.4 trillion in commercial real estate loans that will mature by 2014.

Increase credit union lending caps

Credit unions are hampered by a business lending cap of 12.25% of total assets. Many commercial real estate owners have strong relationships with credit unions, which could help them refinance their properties but find the lending cap presents an obstacle.

Term extensions could save performing properties facing an equity gap

Instead of requiring a refinance at the end of a loan term (and having to deal with a troublesome equity gap), lenders should be encouraged to extend the term of the current loan for commercial properties that can support their current debt service. Currently, lenders do not offer term extensions because they are wary of regulatory oversight concerns.

House actions to date:

• 79 Members of the House, led by Reps. Kanjorski (D-PA) and Calvert (R-CA), signed onto a letter to Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke, urging them to take a more active role in addressing the problems facing commercial real estate markets.
• Reps. Kanjorski (D-PA) and Royce (R-CA) introduced H.R. 3380, the “Promoting Lending to America's

  Small Businesses Act,” to increase the credit union commercial lending cap from 12.25% to 25% of total

  assets.

  
  
  

What we're asking of our Representatives:

• Cosponsor H.R. 3380, increasing the cap on credit union business lending from 12.25% to 25%. Credit Unions can provide an important additional source of funding for small commercial properties that need to
  

  refinance.

  
  
• Support efforts to hold a House hearing solely focused on commercial real estate.
• Urge the Federal Reserve and Treasury to encourage banks to provide term extensions for performing

  properties.

Senate actions to date:

• Sen. Udall (D-CO) introduced S. 2919, the Small Business Lending Enhancement Act, to increase the cap

  on credit union commercial lending from 12.25% to 25% of total assets.

What we're asking of our Senators:

• Cosponsor S. 2919
• Support efforts to hold a Senate hearing solely focused on commercial real estate.
• Urge the Federal Reserve and Treasury to encourage banks to provide term extensions for performing

  properties.