Without a doubt banks have become more conservative in theirunderwriting. Yet, there are still ways that borrowers can tap thiscapital source—even as numerous properties are returned tocreditors. But don't underestimate the uphill climb facingborrowers, says Omar Eltorai, market analyst at Reonomy.

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"Banks and other portfolio lenders will likely stay focused onrisk mitigation and workouts, while new origination will use strictunderwriting criteria and will be targeted at the lender's 'sweetspot' or core area of focus," he says.

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Right now, banks across the country have tightened theirunderwriting standards by requiring higher debt service coverageratios and lower loan-to-values, while granting fewer exceptionsfor borrowers. "While banks have not stopped lending, many havepulled back hard on originating new construction and developmentloans. But many have also become much more conservative withmultifamily and other CRE loans, too," Eltorai says.

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As the economy opens at different speeds around the country,Eltorai expects banks to be much more selective with their neworiginations.

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"Lenders with large exposures to hard-hit sectors of theeconomy⁠—such as energy, retail, and hospitality⁠—are likely goingto keep most of their attention on their current loan assets, andbe more hesitant to originate new loans to these sectors," hesays.

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When banks do lend, there's little doubt that they'll prioritizeprevious customers that have good track records.

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"Given the tighter underwriting standards, more attention paidto existing assets than to new assets, and preference for repeatborrowers⁠—the availability of lending is likely going to continueto be lower than at the start of the year, at least until thelenders feel a strong economic recovery is afoot," Eltoraisays.

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"An example of this might be that we see greater new loanoriginations to repeat borrowers who are not in hard-hitindustries, whereas new borrowers or those in hard-hit areas wouldlikely have much more expensive financing or no financing atall."

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Leslie Shaver

Les Shaver has been covering commercial and residential real estate for almost 20 years. His work has appeared in Multifamily Executive, Builder, units, Arlington Magazine in addition to GlobeSt.com and Real Estate Forum.