In a recent excellent blog article entitled The Death of Real Estate Investing, Susan Lassiter-Lyons pointed out that mortgage financing for investors and real estate speculators is drying up. 

Investors are being forced to pay all cash to buy up foreclosures, which greatly curtails the number of investors bidding on these properties.  The fewer the number of investors competing to buy these REO (Real Estate Owned; i.e., bank foreclosures), the lower the price these REO's will fetch.

I then wrote a blog article with the same title that expanded on Susan's insightful theme.  A reader asks:

Where can I get a copy of your (my) book?

My blog article raised the spectre of crushing deflation and referred to my new book, The Reverse Multiplier Effect - When Crushing Deflation Destroys America.  You can order a copy here.

Why will the current depression last so long?

Japan's deflationary depression has already lasted 18 years, and the Japanese people entered their depression with large amounts of savings.  The magnitude of any depression is proportional to the size of the credit creation binge preceeding it.  Our debt creation bubble was a whopper.  It may takes decades to liquidate all of this debt.

What is the outlook for the commercial real estate finance industry?

As short as one year ago, the conduits were making more than 50% of all new commercial real estate loans.  Now this industry is just a shell of its former self. 

The money center banks were all involved in the securitization game, so when the secondary market for CMBS loans died overnight, they were left holding far more commercial real estate loans than they wished.  For the time being, most of the big banks will be originating just a few very clean deals.

The small banks - the ones not hurt when the CMBS market dried up - are still lending.  But they only have so much money.

Lehman Brothers, which has a portfolio of $200 billion of subprime commercial loans, stopped originating new deals this month.  Bayview Financial, another huge institutional originator of subprime commercial loans, has cut its lending volume by at least 70%.

Subprime and even prime commercial loans are now flowing to the hard money lenders.  Unfortunately many hard money commercial lenders are stuck with huge portfolios of non-performing construction and land loans. 

Fortunately my own hard money shop, Blackburne & Brown, never made any construction loans, and we made very few land loans.  We are still actively arranging loans.

But the bottom line is that the entire commercial real estate finance industry is severely depressed.  And if commercial lenders aren't lending, this will depress the value of commercial real estate.  I expanded on this in my other blog today.

The commercial loans securing most commercial mortgage-backed securities are performing quite well.  The delinquency rate is less than 1.5%.  Why is the CMBS market getting so badly slammed when the main problem is in the subprime residential loan sector?

The issue is one of confidence in the rating agencies.  The rating agencies issued some wildly over-optimistic ratings on residential mortgage-backed securities.  Investors in these residential bonds are now getting slaughtered.  Commercial mortgage-backed securities are guilty by association.

But there is another issue.  The collapse of residential real estate has triggered a recession that will probably lead to a deflationary depression.  All real estate could get clobbered in this depression, even if commercial real estate fares far better than residential real estate.

Some final comments:

There is one asset class about which I am very bullish - farm land.  But I am very bearish on all other classes of real estate.

I debated selling my little mortgage company office building here in Indiana in anticipation of the real estate bear market; but I decided that there is always a chance that the Fed could drop trillions from helicopters.  My advice to you is to only buy real estate that you're going to use.  As explained in my book, the deflationary forces on all real estate are far more prodigous than most investors would imagine.

Attention Ben Bernanke and the U.S. Treasury:  In a recent blog post called The Death of Real Estate Investing, Susan Lassiter-Lyons has brought up a very important issue.

Unless the Fed and the Treasury develops some sort of financing mechanism to help investors and speculators buy real estate using high-leverage mortgage financing at favorable rates, this meltdown in real estate values is going to continue. And its not inflation that keeps Ben Bernanke up at night ... its crushing deflation.

In my recent book, The Reverse Multiplier Effect - When Crushing Deflation Destroys America, our banks get scared and stop lending.  Over a trillion dollars in annual payments on existing loans kept flowing back to the banks, but the banks stopped rolling over their interest receipts into new loans.

Since the multiplier effect today is around 20, and since the multiplier effect works in reverse, the money supply of the United States started to disappear.  Homes fell over 70% in value, and the banks started foreclosing on most of the homes in the United States.

Well, folks, I fear the scenario that I described in my book may be coming true.  The book was written in early 2007, when gas prices were $2 per gallon.  I predicted $6  gas and a complete real estate estate meltdown, even more dire than that of today, by the year 2010.

Fortunately Ben Bernanke and the Fed are very aware of the dangers of deflation.  By propping up Citibank, Countrywide, Bear Stearns, and now Fannie Mae and Freddie Mac, Ben Bernanke has done a masterful job of preserving our institutions.  We are probably in a great depression right now, and Americans will probably have to endure a precipitous decline in their standard of living over the next 15 years.  Ben Bernanke can only do so much.

But Mr. Bernanke, if you're out there, please pay attention to Susan Lassiter-Lyons brilliant blog post.  If you want to save your banks by stopping the decline in real estate values, the country will need non-owner and commercial financing.  It's wealthy investors who have the incentive and the courage to buy foreclosed properties in a declining market.  It is these wealthy investors who have the dough to make timely payments on these new mortgages.  They just need some leverage and a reasonable interest rate.

If you're a commercial real estate loan broker, you shouldn't waste even five minutes working on a construction loan request for a residential subdivision or a residential condominium subdivision right now.  These deals are almost impossible to finance in today's market.  In the minds of most commercial real estate lenders, such constructions loans have the black plague or the coodies right now.

If you're a real estate developer, and you are the sponsor of a broken residential condo project or a stalled residential subdivision, you are going to need more equity.  You only have a few more months before the last of your interest reserve is consumed.  Don't waste time trying to find some commercial construction lender foolish enough to add another 50 homes to the current glut of unsold homes.

Instead, focus your energy on finding some wealthy private investors to help you de-leverage your land.  Maybe you could cut a deal with the bank that has the existing first mortgage.  "I'll reduce your loan balance, Mr. Banker, by 50% if you discount your total loan by 25%." Then you could use this discount to attract a new equity partner.

Your  sales pitch to a new equity investor might be:  "If you bring in $250,000 in equity, Mr. Investor, the bank will reduce it's current loan of $625,000 to just $500,000 - and we'll pay down that $500,000 to just $250,000.  Then my development company will pay you a preferred annual return of 14% in three years when the land is once again ripe for development."

So where does a developer find a private investor to help him carry a stalled residential housing project.  You should try advertising on LoopNet.com.  Call their advertising department and tell them what you're looking to do.

Do you have a residential subdivision construction loan that still makes sense in today's market?  If so, you can submit it to hundreds of commercial construction lenders by using C-Loans.com.  And C-Loans is free!

About six months ago one of my former commercial loan brokerage students came to me and asked me to serve as an expert witness in a commercial real estate loan fee collection case. 

My student had arranged for the delivery of an $8 million SBA loan commitment at a very favorable rate on a hotel near the Newark Airport.  The hotel had been shut down by the city a year earlier for regularly renting rooms by the hour (yup, you guessed it), and the prior owner had lost the property in foreclosure.  My student's client was buying the hotel from the bank.

Fortunately my student had used our commercial loan brokerage fee agreement that provided for arbitration.  He was based in Florida, the borrower lived in New York, and the property was located in New Jersey.  Per the terms of our agreement, the mortgage broker (my student) was allowed to file his Demand for Arbitration in Florida.  He did not have to travel to New York to sue this borrower.

This was a Florida action, and I am not licensed to practice law in Florida.  Therefore the mortgage broker hired local Florida counsel, who in my opinion did a terrific job. 

I was called upon to testify as an expert witness on matters pertaining to the practice of commercial real estate finance.  Even though I live in Indiana, I was able to provide testimony through a deposition that was taken telephonically at the office of a court recorder in South Bend.  It was not necessary for me to testify at the actual arbitration hearing.

The borrower did not really dispute the mortgage broker on the facts.  Instead, the borrower defended on the basis that  the mortgage broker lacked a real estate broker's license in the State of New York. 

Licensing for commercial real estate loan brokers in the State of New York is quite confusing.  The Department of Financial Institutions has adopted the position that out-of-state mortgage brokers do not need a New York real estate broker's license to broker fewer than five commercial loans per year in the state.  The law, however, appears to require just such a license.

The mortgage broker argued that he had never entered the State of New York, and that therefore the licensing laws of the state of Florida should apply.  Since the commercial lender was an institution and the borrower was technically a limited liability company, Florida did not require a mortgage broker's license.

The borrower's attorney argued that the contract was silent on the subject of choice of law.  Since there was an ambiguity and since the mortgage broker had prepared the contract, the ambiguity should favor the borrower.

The mortgage broker's fine attorney's argued that the borrower had already made a formal appearance in state court in Florida in connection with the case.  By doing so that they had subjected themselves to the jurisdiction of Florida laws and had therefore waived this defense.

The arbitrator agreed.  Four days ago the arbitrator granted the mortgage broker an award of $160,0000 - plus $5,000 in arbitration costs.  Hooray for the good guys.

Now the mortgage broker will need to get the award of the arbitrator confirmed by a Florida state court.  The borrower may choose to fight the licensing and choice of law issue again at this stage.  Later, the mortgage broker will need to take his Florida judgment (assuming he prevails) and get it domesticated in New York.  At this stage the borrower may choose to bring up the licensing and choice of law issues again.  

Collecting unpaid loan fees can sometimes be a long battle, but with $160,000 at stake, the mortgage broker was right not to give up.  Fortunately the borrower is worth millions of dollars, so the mortgage broker should eventually collect every penny he was due.

If you need a commercial real estate loan, and the deal is slightly flawed, you should take it to a bank located close to the property.  Most commercial real estate lenders prefer to lend close to one of their offices.

Let's suppose your property is a very successful restaurant in the very best location in town.  Now banks normally do not like to make loans on restaurants because of the high failure rate.  If a local banker, however, dines regularly at the restaurant and appreciates the fact that the business is thriving, there is an excellent chance that he'll still make this commercial real estate loan.

Here's another example.  Suppose your borrower has credit that is slightly dinged, and most of the big banks have already turned down his commercial real estate loan request.  This is another example of where you should take his commercial real estate loan to the small bank located just down the street. 

This small, local bank will probably have a higher interest rate than Wells Fargo Bank or Wachovia Bank, but their rate will, almost certainly, be a whole lot better than those of some commercial hard money lender, like Blackburne & Brown. 

This small, local bank may arguably make a hard money commercial real estate loan ... all because the commercial property is located close to the bank, and they are very comfortable with its value.

Using maps.yahoo.com you can easily pinpoint nearby banks to any property in America.  Or you can simply go to C-Loans.com and choose six banks located close to the property.

If you  need a large commercial real estate loan, go to a large bank.  If you need a small commercial real estate loan, go to a small bank.

Banks are not allowed to make commercial real estate loans that are too large compared to the amount of their capital.  The regulators don't want them to put all of their eggs into just one basket.  For example, if a small, local bank has just $200 million in capital, the regulators certainly don't want this little bank making a $100 million commercial construction loan.

On the other hand, the huge banks, like Deutsche Bank, JP Morgan Chase, and Credit Suise usually don't want to mess with tiny commercial real estate loans.  These huge banks have tens of billions of dollars in capital.  They don't want to mess with little $200,000 deals.  Instead, they want $200 million deals.

So as you are shopping your commercial real estate loan, try to size your lender to the size of the deal in hand.  If you have a medium size deal - say $2 million - then maybe you should apply to some medium-sized regional bank that has 40 or so branches over two or three states.  If you have a tiny deal, look for the tiny First National Bank of the Northeast Corner of St. Louis.

You can also find lots of commercial real estate lenders of the perfect size using C-Loans.com.

Commercial real estate loan brokers usually add a loan fee of one to two points to the fee charged by the bank making a commercial real estate loan.  This a reasonable fee.

Sometimes, however, a commercial real estate loan broker will take a deal to another loan broker, who takes the deal to a third loan broker.  Then they will all try to add a fee of one to two points to the deal.  When a commercial loan broker, or a series of loan brokers, all try to add a huge fee to the same deal, it's called packing the deal. 

Such deals never close.  Usually the banker working on such a commercial real estate loan will just automatically turn the deal down in order to save time.  The banker knows from experience that there is no way that any decent borrower would ever take a deal that has been packed with more than one or two loan broker points.  If some borrower would ever sit still for three or four broker points, the borrower must either be desperate or just plain stupid.  Either way, such a borrower is a poor risk and a waste of time.

If you're a commercial real estate broker caught in such a daisy chain, you need to recognize that daisy chains seldom (virtually never) close. 

Unless you have the absolutely perfect commercial real estate lender in mind, you should immediately walk away from the deal.  If you should decide to tackle such a deal (your chances suck!), you'll first need to convince all of the earlier loan brokers to share between them a referral fee of no more than 33 to 50 basis points.  If they want more, run (don't walk!) away.

Most experienced commercial mortgage brokers would agree that you should always get a signed fee agreement with your commercial borrower.  But when do you ask him to sign it?

If the client is new and you ask him to sign a fee agreement right away, he’ll probably refuse.  Commercial borrowers want the freedom to keep shopping for a better deal, and unfortunately there’s a competing commercial mortgage broker on every corner.  If you try to force him to sign a fee agreement right out of the starting gate, your commercial borrower will probably just walk down the street to another broker.

Instead, you should just be patient.  Convince your commercial borrower to send you his package.  It’s often true that the first broker to get the borrower’s tax returns usually wins the deal.  These tax returns are usually too thick to easily make multiple copies.

Once you have the borrower’s loan package, you should prepare a mini-package for prospective commercial lenders.  We’re not talking about a lot of work here – just an Executive Loan Summary, some pictures, the pro forma operating statement, a lease schedule and a few years’ historical operating statements.  You should be able to whip this up in less than an hour.

Armed with your mini-package, your various commercial lenders should be able to issue a verbal proposal.  Be sure to tell your lender not to start work on a written term sheet until the borrower agrees to his terms by signing your fee agreement.  Then take the best loan proposal and present it to your commercial borrower.

If he wants to proceed, it is now time to explain to him that he must first sign your fee agreement.  If he refuses to sign it, you’re done.  You’ve only lost about an hour on the phone and an hour preparing your mini-package.  Just move on to your next deal.

Most commercial borrowers at this point, however, are anxious to move forward on their loan.  They’ve invested a lot of time with you fetching various documents, and they certainly don’t want to start the whole process all over again.  Therefore most commercial borrowers at this point will readily sign your fee agreement.

Once it is signed, you can then ask your lender to prepare a written term sheet.  Your lender will appreciate knowing that the borrower has just signed your fee agreement – an agreement that described the bank’s loan terms – so your lender is not wasting his time.

No matter what, however, always get a signed fee agreement.  Just about every experienced commercial mortgage broker can tell you a horror story about the time he failed to get a signed agreement. Ouch.

Suppose a commercial real estate appraiser appraises a $1 million commercial building.  Because commercial real estate appraising is so inexact, he can justifiably bring the appraisal in at $1.2 million or $800,000 - depending on whether he is loyal to the borrower or the lender.

Commercial real estate appraisers have a way of unconsciously trying to please the folks who are paying them.  If they are hired by the commercial real estate lender, then they will appraise the commercial property very conservatively.

If a commercial real estate appraiser is hired by the borrower, however, he will too-often work hard to find comps (usually not quite so comparable) to justify a higher value.  In fact, commercial real estate appraisers have a tendency of "falling in love with the borrower."  By this I mean they become vested in the idea of helping this "poor borrower" get as large a loan as possible from this "big, mean mortgage company" who can probably afford a loss anyway because they are so rich from gouging borrowers with a high interest rate.

Therefore, as a lender making commercial real estate loans, it is critical that the commercial real estate appraiser be loyal to you and not the borrower.  Otherwise, you'll be stuck with a portfolio of bad loans that are upside down; i.e., the loan is greater than the value of your collateral.

This is one of the reasons why experienced commercial real estate lenders insist on ordering the appraisal themselves.  If the commercial real estate appraisal is ordered by the borrower or a mortgage broker, most experienced lenders will assume that the appraisal is tainted and over-valued.

If you're a mortgage broker, right now the recession is probably kicking your tail.   If you happen to survive, remember the  economic  pain you're feeling right  now and vow to be better prepared for the next  recession.

The wise mortgage broker runs his mortgage brokerage business with an eye towards how he  will survive through the next recession.  For example:

1. Never sign a long term lease.  Instead, get your landlord to give you lots of one-year extensions.  This way you only have to survive for a few more months until your lease expires, and then you can move into smaller, cheaper space.
2. Don't over-expand during recoveries.  Leave some money on the table.  Yes, it's true.  If you add ten more employees you might make a bigger profit during boom times, but what are you going to do if those ten employees serve you loyally and well?  Fire them at the first hint of a slowdown?  Naw.  You'll try to carry them way longer than you should.  In the process, you'll have to draw down heavily on your line of credit.  By the time you are finally forced to cut them loose, you could easily be so far in debt that you've passed the point of no return.  You end up losing your company and all of the profits you made during the boom times.  So don't over-expand during a boom!
3. It is almost impossible to cut someone's salary.  If if they don't quit, they'll resent you.  They'll hate you, as if you caused the recession.  Instead, keep your base salaries low and simply compensate your loyal employees with frequent bonuses and incentives, like $50 per closing, etc.
4. Don't hesitate to move your office back into your home.  In fact, you should pay extra and buy a bigger home, just in case you do have to retreat to the home.  Borrowers understand.  Recessions are tough on their businesses too.
5. During boom times, get your bank to approve a big line of credit.  Borrow on it regularly, but quickly pay if off.  When your loan balance is zero, and when your profits are booming, apply to your bank for increase in your operating line of credit.  This way, when the recession comes, your line of credit will already be approved, and you can draw down on it.
6. Remember, a real estate recession will hit you hard every seven to ten years.  You can bet on it.  Run your business as if you are preparing your ark for a massive flood.

Let's suppose you're a commercial loan broker working on a commercial mortgage loan.  Suppose three couples own a small office building as tenants-in-common, the Smith’s, the Jones and the Kowalski’s. Should you call this the Smith loan? The Kowalski loan? No.

Often this is easy. The property might have a sign that says, the “Shade Tree Office Suites.” Obviously you should usually name the property according to the sign on the building.

But you have to be careful. Oak Park is an infamous, crime-ridden section of Sacramento, California. If the name on the building was, the “Oak Park Office Suites,” you shouldn't use it. As soon as the lender saw the words, “Oak Park”, the deal would be dead. Instead, you might use, the “West Side Office Suites.”

Always give a commercial loan a good name.

An office building developer recently wrote to me about how important it is that all new buildings be designed to be green.

"If someone does not understand what LEED Platinum is, it is akin to 1990 when someone said they were getting a “cell” phone, or 5 or 6 years ago when someone mentioned “hybrid” car.

"Those that know what “LEED” is tend to be more aware of what is happening in the world of buildings. I would venture to say that 100% of licensed Architects, 98% of commercial office building construction companies, and 70-80% of commercial real estate brokers are very familiar with LEED. You are correct here because I would also estimate that only 10-20% of Bankers are even slightly informed.

"I was in San Francisco a couple of weeks ago for the Green Building Finance Forum and one of the tide changing consensus items was that in one or two years at the most, an office building will not qualify as “Class A” by the leasing industry unless it is LEED certified, regardless of how well it is located, how new it is, or how nice it is.

"There are “green” buildings and there are “brown” buildings. Any building that is in the planning stages or under construction that is not LEED certified is already obsolete. Brown buildings will be the new “office ghettos”. Kinda like the poor guy selling motorhomes or Chevy Suburbans when gas is $5 per gallon and rising. LEED certified buildings are taking the market share like the Toyota Prius did to the Hummer.

He went on talk about the energy efficiency of his own new building: 

"What on earth does LEED mean anyway?" I asked.

LEED stands for Leadership in Environmental and Energy Design. It basically is a point based, voluntary building code (about to become law in San Francisco) and is administered by the US Green Building Council (see www.usgbc.org). It is kinda like the Energy Star program is for appliances.

The mortgage business has been very slow recently, and it's not likely to get  better for at least a few more years.  If you're a mortgage broker, here are some tips that may help you survive on far less income.

1. If your operation is small, close your office.  Retreat back to an office in your home.  Don't worry about your image.  Every else in America is cutting back as well.
2. If your operation is too large, then retreat to a smaller, less expensive office the moment your current lease expires.  And in your next life as a mortgage company owner, never sign a long term lease!  Sign short term leases with lots of options to extend.
   
3. If you have dozens of loan agents, you don't need an assigned desk for every one.  Instead, provide desks for about 30% of the number of loan officers currently working full or part-time for your company.  Each desk just needs a phone and a networked computer.  No one gets an assigned desk. In real life, only a handful of your loan agents will ever be working the floor at any one time anyway.  This allows you to lease far less space and keeps your overhead down.
4. Make sure your loan agents know how to arrange both home loans and commercial loans.  You need to be able to make some dough from any lead.  The cheapest way to teach your staff how to arrange commercial loans is to order our nine-hour video training program.  This way any new loan agents can quickly be taught commercial mortgage finance.
5. If you have a large mortgage company with lots of loan agents, you can hire me to fly out and train your entire staff in one nine-hour training session.  The cost is $6,000.  More on this ...
6. If you are going to broker commercial loans, concentrate on the do-able deals.  For example, international commercial loans never close.  Don't waste your time.
7. Don't work on construction loans.  If the developer had enough cash into the deal, his own bank would have made the loan.  Invariably the construction loan requests received by mortgage brokers are deals where the developer doesn't have enough skin in the game.  They are a waste of time.
8. Unless you have been brokering commercial loans for at least five years, don't work on commercial loans larger than $5 million.  Any investor strong enough to borrow $5 million knows fifty bankers personally.  If the deal was do-able, they would have done the loan for him.  These large deals are pipe dreams that waste your time.
9. Buy commercial mortgage leads from C-Loans.  They cost only $1 to $3 each, plus 37.5 bps. if the deal closes.
   
10. Focus your extra time on developing a marketing list (direct mail, fax or email) of contracts who can refer deals to you.  The best commercial leads are the ones that come from referrals.

Let's suppose you're a general purpose (both residential and commercial) mortgage broker and you're starving.  Here's a good way to drum up some business.

Tell your auto repair mechanic, your favorite restaurant owner, and the owner of your pool cleaning service that it's last call for subprime commercial loans.  I predict that the subprime commercial mortgage loan market will shrink by 75% within six months.  If these small business owners are ever going to pull some equity out of their commercial buildings to tide them through the coming recession, it may be too late if they don't apply in the next few weeks.

The way that Wall Street lenders, like Bayview Financial (a fine firm and good friends of ours), raise their lending capital is to securitize their subprime commercial loans.  They put the loans in a big pool.  They assign the pool of loans to a trust.  The trust issues bonds backed by the loans in the trust. 

Then investment bankers sell these bonds into the Asset-Backed Securities (ABS) market.  In addition to subprime commercial loans, credit card debt and car loans are also often sold as ABS bonds.

The problem is that the buyers of these ABS bonds are now requiring massively higher yields.  I read in Bloomberg yesterday that the buyers of AAA-rated ABS bonds are currently demanding yields that are a full 2% (200 basis points!) higher than they were just eight months ago.  The appetite for ABS bonds is clearly waning.

In addition, Wall Street subprime commercial lenders are also being forced to lower their loan-to-value ratios.  For example, Silverhill Financial recently lowered its high-LTV program from 97% to just 85% loan-to-value.

These changes are a warning that the market for ABS bonds may be drying up.  If Bayview, Lehman Brothers and the rest of the Wall Street subprime commercial lenders suddenly dial back their programs, the relatively tiny hard money commercial lending companies, like Blackburne and Brown, will be unable to handle the overflow.  Subprime commercial mortgage lending could largely dry up, and it could happen very quickly.

Therefore you need to tell the owner of your favorite coffee shop and your auto body repair guy that if they are ever going to try to borrow against their buildings, they better do it now!

Seven months ago the money center banks were making lots and lots of commercial real estate loans.  By money center banks I mean the big nationwide banks, like Citicorp, Bank of America, JP Morgan Chase, Wells Fargo Bank and Wachovia.

Unfortunately for most of the money center banks, they were participants in the residential mortgage backed securities pipeline.  They made alt-A home loans and subprime home loans, and they briefly held these loans in their portfolio until the loans were ready to be securitized. 

Then the music stopped.  The market for residential mortgage-backed securities secured by alt-A and subprime home loans suddenly dried up.  There were no more buyers. 

As a result, the money center banks found themselves stuck with tens of billions of dollars of these risky home loans on their books.  They lost a lot of their liquidity, and they are all terrified of future loans losses.

The end result is that the money center banks have largely frozen their balance sheets.  They aren't making a lot of loans of any type, so their commercial real estate loan volume is down sharply.

Fortunately most of the smaller commecial banks were not involved in securitizing subprime home loans.  Therefore they were not stuck with billions of dollars of crumby home loans when the music stopped, and they still have an appetite for new commercial real estate loans.

So if you need a commercial real estate loan today, and your deal is clearly bankable, look for a smaller bank to make the deal.

You can also apply to 750 different banks for a commercial loan in just four minutes using C-Loans.com.

Mortgage money for commercial real estate loans is drying up.  Officially several thousand banks are still in the market to make commercial loans, but in practice the banks simply aren't approving many deals.  The volume of commercial real estate lending by banks is down by more than 60% since last August.  A commercial loan has to be almost perfect to get approved by a bank these days.

And the situation is going to get worse.  Most western countries are in the midst of a credit crunch.  The money supply is steadily shrinking.  Commercial real estate lenders are getting more and more frightened.  This tight money situation could continue for seven to ten years ... or maybe longer.  Japan's money supply began to contract when it's stock market crashed in 1990.  Eighteen years later banks in Japan are still very cautious about lending.

If you have a balloon payment coming due on any of your commercial properties in the next three to four years, you better run, not walk, down to the nearest bank first thing tomorrow.

You can also apply for a commercial real estate loan to 750 different banks in just four minutes using C-Loans.com.  And C-Loans is free!  Please click here to apply.

Commercial banks are scared.  They lost billions of dollars when the market for subprime and alt-A residential loans suddenly dried up.  They are stuck with billions of dollars of these risky home loans sitting on their balance sheets.

In response, most commercial banks have virtually stopped making commercial real estate loans.  They are not officially out of the market , and if a commercial deal is perfect, they might still make the loan, after an extra two weeks of anguishing over the deal.  But for all practical purposes, the banks have stopped making any significant volume of commercial real estate loans.

As the saying goes, "Stuff flows downhill."  Since the banks aren't making commercial real estate loans, these loans are flowing to the Wall Street subprime commercial lenders and the hard money commercial lenders.  My own hard money commercial lending company, Blackburne & Brown, is enjoying a terrific volume of very fine commercial loan applications.

I spoke with the owners of four other hard money commercial lending companies last week, and they all reported wonderful increases in their commercial loan application volume.  Each one was amazed by the quality of the deals that they are being asked to make.  We are all seeing bankable borrowers knock on our doors.

This is all great for my buddies and me, but if you are a subprime commercial borrower, you better get your commercial loan application submitted to us very soon.  Otherwise you might find all of the hard money commercial lenders too picky to fund your less-than-perfect commercial real estate loan.  Please click here to apply.