Lenders Originating More High-LTV Loans

Debt funds are placing competitive pressures on the U.S. commercial mortgage sector. That is being propelled by the higher average loan-to-value ratios (LTVs) for the mortgages originated by these groups, according to research by Real Capital Analytics (RCA).

In the 12 months through Q1 2018, non-depository financial institutions tracked by RCA originated mortgages on existing commercial properties at an average 64% LTV. By contrast, lenders of all other types originated loans at an average 63% LTV.

RCA CRE economist Jim Costello writes, “The 100 bps difference in these measures may not seem like much, but it hides the skew towards higher LTV loans on the part of the debt funds: 20% of their loans are at LTVs of 80% or higher. For all other lender groups, by contrast, this 80%-and-higher range represents only 11% of their originations.”

Costello notes that the higher LTV ratios represent higher levels of risk. The debt funds are gaining market share, in some cases, by taking on levels of risk that other lenders cannot because of regulatory constraints. He points out that the overall share of lending tied to these debt funds is still low, but this competition in the debt markets so late in the market cycle raises concerns about financial market stability.

For comments, questions or concerns, please contact Dennis Kaiser

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About Dennis Kaiser

Dennis Kaiser is Vice President of Public Relations and Communications for Connect Creative. Dennis is a communications leader with more than 40 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect Creative’s agency client services and is involved in a range of initiatives ranging from public relations and content strategy, communications and message development, copywriting, media relations, social media and content marketing services. Prior to joining Connect Media in 2015, his most recent corporate communications roles involved leading a regional public relations effort across Southern California for CBRE, playing a key marketing role on JLL’s national retail team, and directing the global public relations effort at ValleyCrest (BrightView), the nation’s largest commercial landscape services company. He has worked on marketing communications assignments for such CRE companies as Blackstone/Equity Office, Carlyle, Caruso, Disney Resorts, GE Capital, Irvine Company, Hines, Howard Hughes Corp., Jeffries, Lennar, MGM, Marcus & Millichap, Prologis, Raleigh Studios, Simon, Starwood, Trammell Crow Company, Transamerica, UBS and Wynn Resorts. Dennis has also worked on communications and launch strategies for a number of consumer electronic, media and tech brands including SlingMedia, Channel Master, Deluxe Media Entertainment, BeIn Sports, EchoStar and Sprint. Dennis’s agency background included firms such as Off Madison Ave., Idea Hall and Macy + Associates. He has earned an outstanding reputation with organization leaders as a trusted advisor, strategic program implementer, consensus builder and exceptional collaborator. Dennis has developed and managed national communications programs for Fortune 500 companies to start-ups, both public and private. He’s successfully worked with journalists across the globe representing clients involved in major-breaking news stories, product launches, media tours, and company news announcements. Dennis has been involved in a host of charitable and community organizations including the American Cancer Society, Easter Seals, Boy Scouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and the Thunderbirds Charities.

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