Monday, July 5, 2010

When Everyone Is 'Licensed'

Much happening in the world of commercial real estate these days. Banks either won't -- or are afraid -- to lend money.

Creative, out-of-the box thinking is the only thing getting deals done these days. Often such transactions include private money -- investments from so-called "hard money lenders."

And now the Obama administration has decided it doesn't like that.

In new draft legislation that is part of the bank reform/financial overhaul bill there is language that will continue to kill commercial/investment real estate business. Never mind the White House says it wants to spur economic development, the children overseeing financial affairs either are the Marxists their political opponents claim, or they haven't a clue about the way business works.

Spend out way out of a recession? The rest of the world isn't following that lead, and rightfully so.

But now out of the box come two huge blunders, in my expert opinion. One, I will write on in a later post involves new regs instituted by Fannie Mae and Freddie Mac back in February, dealing with reverse mortgages and what could be the death-nell of the re-sale condo market due to the brilliant strategies of Team Geitner (that would be U.S. Treasury Secretary Geitner).

Front and center in today's essay are the proposed restrictions against hard money lending. Specifically, the attempt to quash creativity that may well be the only thing getting any commercial deals done these days. I'm talking about proposed rules that will restrict the number of private loans an individual may make on real estate. Specifically, the documents I have read limit such transactions to one every three years. Any more than that and the individual making the loan needs to acquire a mortgage broker's license.

All in the name of protecting consumers. The only thing worse would be to revive the Clinton-era mantra of "it's for the children." Only that's not too far from the truth. The Obama administration thinks of consumers, and the electorate, as uneducated children who must be spoon-fed and sheltered, lest they skin their collective knees.

Talk about your unintended consequences.

If things weren't already bad enough, these proposals by the Obama administration will go far toward ensuring more bankruptcies and foreclosures as one of the only sources for funding for commercial transactions will be effectively prohibited from making common-sense loans to purchasers of commercial property who are in every sense good risks. For, in case you didn't know it, most banks that used to do commercial loans are scared of their own shadows, or live in fear of the U.S. Treasury, unrealistic expectations and formulas for loan-loss reservers, etc. So they are calling in their loans and not making any new ones.

But thats just my opinion. I will link to this post in a day or two with documents illustrating the government's position on regulation. Seriously, I cannot for the life of me understand why the arbiters of power and control, who say they want to be transparent, are so damned hell on "licensing" everyone. Oh yeah...wait, its that "control" thing.

Like licensed mortgage brokers had nothing to do with the real estate collapse that started a couple years ago? As John Stossell would say, "Give me a break!"

More to come.........

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