Tag Archives: 2006
Are Banks funding Apartment Loans, ReFinancing and Commercial MultiFamily Construction Projects?
A common question being asked in todays financial climate, “Are apartment financing, MultiFamily property refinancing or apartment construction loans still available?” The answer to this question is a resounding YES. I continue see loans funded for apartment purchases, apartment refinances and construction lending. This is awfully good news in a time of a protracted credit crunch; a credit squeeze which has now gone global in its scope.
A source close to my company, one with ties to the top counsels of Fannie Mae and Freddie Mac, recently confided that Fannie and Freddie have been making money ONLY in the Apartment and Mobile Home Lending sectors. The upshot is this: These two venerable institutions of probity are determined to increase liquidity and strengthen apartment lending programs. The Fed needs to hang its hat on something, so why not strengthen an already existing stable lending platform to promote future growth in an industry already doing well: Apartments.
This protracted credit squeeze began as a virus. This virus started with the housing industry and contaminated the commercial real estate market along with just about every stock, financial instrument, business man, woman or line of credit in the country. Apartments have been the least impacted the credit crunch, but sales volume has still registered sizeable decline.
What a mess it has become. The chill in the credit markets began in October 2006. By October of 2007, this chill had become a deep freeze.
To understand the steep decline in the commercial real estate industry, one need only look at the numbers: Total commercial sales volume for October 2008 was barely one-quarter of its October 2007 level and just over 20% of the levels it achieved in 2006. Now that is a drop!
The aggregate deal volume and sales volumes for commercial real estate as a whole is down 75%, October 2007 to 2008.
For apartments, the fall off in deal volume has been sharp and steady: The number of properties trading hands has fallen 60% from October 2006 to October 2007 and has fallen another 75% this past 12 months.
There are several explanations for this but perhaps the number one reason is price risk, as measured between the spread of cap rates and the 10-Year Treasuries. In the apartment sector, this spread has more than tripled, (not Good) to a spread of 263 bps from their narrowest point in July of 2006, when it was 81 bps.
Between 2000 and 2004, the total renter households declined by 1.9 million as home ownership increase from 66.9 percent to 69 percent.
In 2005 this house-hold, rental-living trend began to reverse itself. Since the beginning of 2007,the home ownership rate has fallen by 110 basis points, resulting in 1.5 million additional renter households. This reversal is most pronounced in the younger age segment but it cuts across all age lines. The trend is up for rental-living-units.
In the end, Apartments are holding up well. Financing IS available and more people than ever are in need of rental housing.
Consumer Credit Act in UK
Consumer Credit Act of 1974, Chapter 39 states that it is An Act to establish for the protection of consumers ~ new system, administered by the Director General of Fair Trading, of licensing and other control] of traders concerned with the provision of credit, or the supply of goods on hire or hire-purchase, and their transactions, in place of the present enactments regulating moneylenders, pawnbrokers and hire-purchase traders and their transactions; and for related matters. [31st July 1974]
Consumer Credit Act 1974 is a consumer protection law in the UK which requires certain businesses to obtain consumer credit licenses. This Act protects any individual who receives credit up to £25,000. All appeals under the Consumer Credit Act need to be made to the Office of Fair Trading. This Act governs personal loans and other credit agreements.
Gist of the provisions of the Consumer Credit Act 1976
Any business offering credit agreements must obtain a credit license from the Office of Fair Trading, attaining which your business becomes a licensed credit broker
The customer must be aware of all the details of the agreement including interest rates
Customers must be provided with the exact details of the transaction including cash purchase price, details on how the credit price works out, all the monthly costs and what the final cost of credit is
Consumer Credit Act 1974 requires:
All agreements will be in writing
Full written details of the true interest rate (APR) should be quoted
Cooling-off period (which starts on the day customer signs, it varies for different goods and services) should be allowed during which borrowers might change their minds and cancel agreements
How does the Consumer Credit Act 1974 protect the consumer?
Consumer Credit Act regulates all those who are involved in offering credit. It enables the consumers to gain a better understanding of the nature of the agreements they are getting into. Consumers tend to get lured by attractive interest rates and freebies offered by lenders but this Act enables the consumers to make the best informed choice.
Consumer Credit Act also controls and regulates the activities of those who can provide credit under this Act. It also incorporates what steps a lender must take in case of default. This is not just limited to banks but also traders who offer goods on hire purchase and the various transactions they undertake.
This Act lays down rules which covers the form and content of all agreements, credit advertising, method of calculating Annual Percentage Rate (APR) and the procedures which will be adopted in the event of early settlements, defaults or even termination.
Consumer Credit Act 2006
Consumer Credit Act 2006 is the most significant change since Consumer Credit Act 1976. Although it received the Royal Assent on March 30th 2006, the key implementation dates set out are 6th April 2007 and 6th April 2008.
The key changes to the Consumer Credit Law along with its implementation dates are:
Removal of £25,000 financial limit (6th April 2008)
New definition of individual (Late 2006)
Retention of £25,000 financial limit for business lending (6th April 2008)
New business exemption (6th April 2008)
Interest on default sums (6th April 2008)
Minimum standard of post contract information (6th April 2008)
Unfair relationships (6th April 2007)
Licensing (6th April 2008)
Financial Ombudsman Service (6th April 2007)
Consumer Credit Appeals Tribunal (6th April 2008)
Enforcing credit agreements (6th April 2007)
Consumer Credit Act assures protection o people who enter into credit agreements.