What Can Borrowers Expect Post-Brexit?
Changes are coming to the world economy in the wake of the monumental shift that is Brexit.
Lending standards tightening “will be the new normal,” Liner Law’s Richard A. Schloss tells Bisnow while commenting on the lending sector post-Brexit. Richard spoke at length on this topic during the Cash Infusion: Capital Markets Update panel at BMAC West this past July.
Bisnow recently sat down with Richard, who concentrates his practice in real estate development, acquisitions and dispositions, venture formation, and conventional, construction, securitized and mezzanine financing, to get more insight into what the future holds.
We've Seen This Before
Richard pointed to a significant economic shakeup from recent history to preview what we can expect in the coming months and years.
“Pre-Lehman Brothers and the market collapse in ’08 and ‘09, standards were very, very loose. There was a lot of easy money, and underwriting was not the greatest in some instances. After that occurred, there was a stretch of time—about a year to 18 months—where it was almost impossible to get a loan.”
The Competition Just Went Up
With tighter standards, the quality of the project and the quality of the sponsors mean more than ever.
Richard says it’s likely for the best that marginal projects that pose a higher risk for lenders have a much lower chance of receiving a green light or a favorable rate, but the increased scrutiny is “definitely slowing deals down.”
“The conservative underwriting is not necessarily bad for the market overall,” he says. “It will help prevent another bubble.”
Lower For Longer
For those approved for financing, there is a silver lining.
“After Brexit happened, interest rates dropped dramatically,” Richard says. “So a few days after that occurred, other panelists were saying that they saw such a surge in applications and rate locks that they expect a slowdown in future rates. While there might be a blip in activity, rates are going to be low for the considerable future.”
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