Category : Debt & Equity

Real estate lending is making a triumphant return, but not everyone is happy about it. A growing number of observers openly worry that the recent uptick in commercial lending activity is being accompanied by a return of the lax underwriting that helped cause the 2008 crash. “There is a deterioration of underwriting standards independent of what is happening to (market) fundamentals,” said Sam Chandan, an economist who follows the U.S. real estate markets. “Lenders have good reason to be concerned right now about some of the trends we are observing.” Brokers and economists warn that lending is growing at a faster pace than market fundamentals in many parts of the U.S., spurred by laxer underwriting standards. The most visible symptoms include rising loan-to-value ratios, shrinking interest rate spreads, a growing appetite from lenders for riskier markets, and the return of interest-only loans.