At Steelhead Capital, your loan experts are here to assist you in weathering the financial waters and making the most of your portfolio of commercial investments. Contact us today for your complimentary loan review.

SOURCE: Wall Street Journal

In a subscription article on August 21, the Wall Street Journal takes a hard look at the commercial paper market, and why many experts feel the Fed's efforts of last week have not entirely resolved the issues at hand. According to the article:

"The Fed on Friday cut its discount rate by half-percentage point in an attempt to alleviate the pressure on banks that found their access to the commercial paper market shut off amid a crisis of investor confidence."

Not seeing a quick fix in site, the commercial paper market is going to be something to keep a close watch on in the months ahead. The article adds, "As the asset-backed commercial paper market continues to reel from the credit crunch that has upended confidence throughout financial markets, investors have channeled their funds into short-term Treasurys that carry a maturity of six-months or less."

Here at Steelhead Capital, our new Investment Advisory Services are designed to help you make sense of the market changes and plan for your very best long term strategy in the commercial real estate market.

SOURCE: Seeking Alpha

In this highly readable article the author, Markham Lee, examines a few possible causes of the current mortgage crisis. Primarily, and we have to agree, he places the blame on "bad products" in the mortgage industry. Mortgage services that were "simply bad ideas in the first place" and "put the customer in a precarious and unsustainable financial situation."

It's a regular discussion here at Steelhead, and one of the greatest advantages to having an experienced mortgage broker on your team. Unlike banks themselves, Steelhead is not trying to push any particular product to the investor, rather it is our position to examine all of the funding solutions on a day to day basis and find the right match.

Worth a read...

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SOURCE: Wall Street Journal

In a subscription article on August 22, author Ryan Chittum of the Wall Street Journal examines the declining stock prices of commercial real estate services firms, in particular CB Richard Ellis Group which "plunged 30% as the credit mess leads investors to predict a severe slowdown in property sales and worry that an economic slowdown could hurt leasing."

Mr. Chittum adds, "With the turmoil in debt markets turning into panic in recent weeks, the markets for high-yield commercial-real-estate debt have seized up, making it more difficult to finance buildings. Banks have dialed back their lending, concerned about the hefty amount of real estate loans they may have to hold on their books due to the pullback among debt buyers."

Again we're seeing a great deal of uncertainty in many aspects of the commercial market. Investments are not going to disappear, but they may become harder to find funding for, and there may be a few more brokers out on the streets looking for a new source of employment.

SOURCE: Forbes

Amid all the bad press surrounding the markets today, here's some encouraging news....

The report quoted here from the National Association of Realtors shows that the Commercial Leading Indicator for Brokerage Activity rose to 120.7 in the second quarter, up from 119.7 in last year's second quarter and 120.1 in the first quarter this year.

Moreover, says Lawrence Yun of NAR, "The reading suggests industrial and office sectors likely will expand use of commercial office space the next six to nine months."

This reinforces earlier posts quoting the brighter horizons in the office sector.

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SOURCE: Springfield Business Journal

In a subscription article on August 20, author Phil Bird puts together a really good primer on commercial real estate investments and the variety of lending sources available to investors.

"Commercial banks, life insurance companies and commercial mortgage-backed security pools, commonly known as conduits, all provide commercial and multifamily real estate loans. But how does each vary? As a borrower, it’s important to know which lending source is best for a particular piece of property, weighing the pluses and the minuses of each before making a decision."

A helpful read for new investors...

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SOURCE: Wall Street Journal

In an article titled "Credit Crisis Hits Small Lenders" today, the Wall Street Journal details many of the ingredients of just why so many lenders are either suffering or out of business. One of the more interesting aspects of this article is where the topic shifts slightly to address the crunch being felt by mortgage brokers as well.

"Brokers are suffering too as lenders rapidly change their guidelines and rely more on their own employees to originate loans."

Other evidence is offered, such as WaMu sending a note to brokers Friday saying it was reducing the amount of money they can be paid by the lender -- a fee known as yield-spread premium. While this primarily addresses the residential market, their point remains that there are a lot of brokers, both commercial and residential, who have been specializing in products that may no longer even exist.

And to emphasize their point they offered this graph of the increase in mortgage brokers, perhaps suggesting the fallout may be part of a natural cycle in the industry.

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SOURCE: Hospitality Net

In an article on August 15, Hospitality Net addresses the radical changes in commercial mortgage markets and still communicates a steady, reserved optimism for the hospitality industry.

"Still, hotel deals are getting done and the capital markets should calm over the next few months. Despite signs of change in the hospitality industry, the sector’s current strength should continue for another couple of years - and even then, the run is not expected to end as abruptly as past expansions have."

The author, Cameron J. Larkin, goes on to examine the impacts of the rising cost of debt, costly guest/franchisor demands, and increasing energy costs as additional burdens on the already over-taxed market. It's a solid look at the hospitality industry today, and worth a read...

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SOURCE: Bloomberg

U.S. short-term Treasury securities rallied, led by the biggest gain in three-month bills since 1989, as investors sought shelter in the safest assets on concern that companies are having trouble raising funds.

Two-year notes rallied as traders stepped up bets the Federal Reserve will cut borrowing costs. Merrill Lynch & Co. lowered its rating on Countrywide Financial Corp., the biggest U.S. mortgage lender, to ``sell'' today and raised the possibility of bankruptcy.

The U.S. subprime mortgage crisis will cost credit investors about $150 billion in losses worldwide, Calyon, the investment banking unit of Credit Agricole SA, France's third-largest bank by market value, estimated today.

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SOURCE: Market Watch

According to today's article in MarketWatch, "Subprime mortgage problems have spread across so much of the credit market that they've begun to cause disruptions in the commercial mortgage interest rates and paper market, which provides a lot of the short-term fuel that keeps corporate America running."

The article cites falling stock prices in mortgage companies such as Coventree, Countrywide, and Thornburg, and goes on to quote David Rosenberg, North American economist at Merrill Lynch. In a letter to clients on Wednesday, Rosenberg offers a cautionary note.

"The turbulence in subprime mortgages has now spread to the commercial paper market -- a $2.2 trillion market in the USA that is the working capital lifeblood for the corporate sector. This is looking worse than just another credit cycle."

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This news is far from earth shaking as we've seen the signs for quite some time. However, the more stringent lending standards that are emerging in the residential market do have their affects on the commercial lending platform. It also provides yet another reason to consider working with Steelhead Capital's new Preferred Residential Loan program, where you gain the experience and leverage of commercial lending experts in the financing of your important residential loans.

SOURCE: Wall Street Journal Online

Standards are tightening while some mortgage companies are going under reports an insightful article in today's WSJ Online.

Perhaps the most impressive news is that several residential mortgage companies have all but closed their doors for business. American Home Mortgage Investment Corp., which stopped making loans earlier this week, said late yesterday it would cease most operations, slashing its work force to about 750 from more than 7,000.

Less shocking but still noteworthy is the rate jump seen in the residential markets where Wells Fargo & Co. is charging 8% for a prime jumbo 30-year fixed-rate loan that carried a 6 7/8% rate late last week.

The fright among investors is forcing lenders to go back to more-conservative practices that were the norm before the housing boom of the first half of this decade. Many now are focusing on loans to borrowers who are willing to document their income, can make a down payment of at least 5% and have a history of paying bills on time.

At Steelhead Capital, your loan experts are here to assist you in weathering the financial waters and making the most of your portfolio of commercial investments. Contact us today for your complimentary loan review.

SOURCE: Reuters

In an otherwise bleak time for the stock market and commercial real estate investors, today Moody's Investors Service said that it did not believe the subprime damage would negatively impact the ratings of major U.S. commercial and investment banks because of their diversified earnings power.

The banks' overall exposure to the subprime sector is modest relative to their capital and liquidity, Moody's said in a statement. "Our evidence suggests that risk management is working effectively during this stress period," the rating agency said.

Diversification is allowing the banks to post solid results despite write-downs resulting from a severe decline in prices and evaporation of liquidity in the subprime sector, Moody's said.

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SOURCE: PR Newswire

Yesterday Congress voted to reauthorize the federal government's terrorism risk insurance program, giving realtors and brokers a bit of good news in an otherwise challenged market.

H.R. 2761 extends for 15 years the the terrorism insurance program
that was initiated after the September 11, 2001, terrorist attacks; make
available coverage for nuclear, biological, chemical or radiological (NBCR)
attacks; require the Treasury Department to report on the terrorism
insurance market every two years, including an analysis of terrorism
insurance pricing impacts on commercial real estate; and establish a blue
ribbon commission tasked with recommending a long-term private market
solution.

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Commentary

According to the article, this news of lower defaults in the commercial mortgage market is tempered by the record high in residential foreclosures. Our advice is to proceed with caution, but to keep a look out for opportunities as they arise.

SOURCE: Globe Street

A quarterly survey by the California Mortgage Bankers Association at the end of June shows a drop in the number of delinquencies in the California commercial lending market. Of the 10,743 commercial real estate loans included in the survey, just three were more than 30 days delinquent, according to the CMBA.

The numbers translate to a default rate 0.03%, the lowest rate since the June 30, 2002 survey, which found a default rate of 0.01%. As recent as March 30, 2007, the delinquency ratio was .13%; one year ago the ratio stood at .09%.

Seventeen income property mortgage bankers participated in the CMBA survey. These companies originate and service loans on apartments, retail, industrial and other commercial properties for institutional investors such as life insurance companies and pension funds.

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SOURCE: Wall Street Journal

According to an article in the August 1st WSJ Online, the fuel behind the skyrocketing commercial real estate prices of the past three years -- cheap debt and easy lending terms -- is running low. As a result, high-risk buyers might be left behind and the pace of real-estate companies going private might slow.

Moreover, these low-cost loans with lenient terms have propelled the commercial real estate market to what many feared was an unsustainable level. The boom was propped up by the commercial mortgage backed securities markets, which allowed banks to issue mortgages, pool them and sell them as bonds.

With less risk on their books, banks were able to lend with cheaper rates and looser terms, making it easier for private-equity firms to buy huge portfolios and real-estate investment trusts. The buying frenzy culminated in Blackstone Group's landmark, $23 billion acquisition of Equity Office Properties Trust in February. Many of those EOP properties were quickly flipped at even higher prices.

The new climate for the commercial market makes having an experienced commercial real estate broker on your side all that more valuable of an asset. To discuss your portfolio and investment plans, take a moment to submit your confidential loan request online today.

In the past few weeks, though, nervous buyers of these commercial securities have pulled out of the market altogether or demanded sharply higher yields, fearing that many transactions were too risky. That has forced lenders to raise interest rates, increasing the cost of buying real estate.

Investors are fretting over the commercial sector despite strong fundamentals because they see similarities to problems that led to the crash of the subprime residential-mortgage market. This spring, the credit-ratings services issued warnings about lax underwriting standards on commercial loans.

Throughout the boom, many buyers borrowed 85% or more of the total costs of their acquisitions. Many of these loans were underwritten either with the presumption that rising prices would allow buyers to flip the properties for a profit or that future rent increases would offset the high mortgage payments.