This is the final article of my series titled “Interesting Times in Real Estate” that covers the following key real estate trends:

  • Housing Inventory
  • Interest Rates
  • Recent Changes in Residential Real Estate
  • Recent Changes in Commercial and Construction Financing (Today’s article)

If you have questions about these or any other topics related to real estate, real estate financing or real estate trends, please feel free to reach out to me.

Now for Part 4 – Recent Changes in the World of Commercial and Construction Financing.

First of All…What is Commercial and Construction Financing?

Answer: Any building, structure or location where business is conducted and where revenue may be created that needs financing.  In addition, any residential style property equal to 5 units or more, often referred to as multifamily or apartments where renters reside.  Lastly, if the structure or building is not built, often times investors or buyers will build out the property and have the need for financing, also called Construction financing.


What are the Types of Commercial Property?

  • Multifamily/Apartments
  • Retail
  • Office
  • Light Industrial
  • Auto Dealerships
  • Parking Structures
  • Skilled Nursing
  • Anything Hospitality

What Happened Last Year and This Year?

Do you remember these three letters, SVB?  Well in 2023, Silicon Valley Bank closed their doors only to be purchased by First Citizens Bank on March 23, 2023.

Why did SVB close? 

For two reasons, that include a lack of diversification where much of their customers’ deposits were from tech companies. SVB then invested those funds in long term U.S. treasuries and mortgage-backed securities, which got crushed when the Federal Reserve increased rates in 2022 and part of 2023 causing these assets to lose significant value.  That was followed by a bank run where customers withdrew their money as news spread that SVB may go out of business, which it did, creating mass losses for the bank and for the FDIC to the tune of $20B.

Other banks followed suit including First Republic and Signature Bank as well as others.

As banks closed, consumer confidence suffered not only for depositors but for other banks throughout the U.S. as well.  This caused banks to tread carefully in creating lending relationships with new clients but also seriously looking at existing clients that lost liquidity or showed declining income or declining cash reserves.  The bank’s focus in lending went from focus on the property to the borrower and if the borrower was not perfect, the lender would cease ties to them especially if they had a lending relationship with them.

Interesting how this feels like SOX in that one company can have a negative impact on the entire real estate and banking industry and its banking customers.

What is Commercial Lending Like Today?

In one word – conservative!  Or maybe better yet, two words – very conservative!

In the past, banks that loaned on commercial type properties mostly focused on the property in terms of location, cash flow and condition of property.  With construction, bank financing would typically be based on what was being built and the potential market for the finished product whether the property was a home, townhouse, condo, 4 unit or commercial property.

Today those property factors are still a concern, but now lenders are very much concerned about the borrower’s experience, relationship with the bank, cash reserves, credit, solvency etc.  If any red flags emerge, the bank will simply decline the deal with little explanation.  In fact, some banks aren’t taking on any new business whatsoever until consumer and banking confidence increases.

Imagine if you’re a commercial loan officer at a bank that currently isn’t willing to loan to anyone…What do you do?  Quit and go to another bank that could do the very same thing?  Better yet, imagine you’re the customer and you’re looking to get a deal done where financing is needed and the bank says, we are not lending right now and have no plans in the immediate future to lend.

This year and last year, I had many commercial banks that were once my “go to” for financing, but today some are simply saying they aren’t lending in the current climate regardless of what the client has in reserves or in experience or what the property cash flows at.  As a mortgage broker, having access to multiple banks is critical in today’s climate and I’m grateful to have access to more than 60 banks, many of which are still lending at favorable terms.

Recent Story about Lending…

Recently I had a client looking to obtain construction financing equal to $15M to build 5 custom homes and all of the big banks stated that there was too much risk in building homes on spec (to be sold in the future).

My response to these banks…Wait a minute…the borrower owns the land, residential inventory is at an all-time low and demand is at an all-time high.  What risk?  We ended up getting it done with a local bank that asked the client to deposit a little less than 10% of the loan proceeds (something that is very common right now).

Another Story…

Another client that was looking to purchase a medical office and use SBA which is super expensive as rates are at an all-time high coupled with high fees. I offered a better solution that uses the client’s income and the current rents from the property to qualify.  It requires 15% down versus 10% down but saves the client about 1% in rate and about $20k in closing costs.

Being a mortgage broker in this market sure has its benefits as it gives our clients much more freedom and flexibility than working with a large bank that has lots of rules and no flexibility all due to what occurred last year with SVB and First Republic.

Last Story…

Have a client that rents an office space and their landlord which is also the owner of the building recently had a “margin call” from their lender after finding out that the building they purchased 3 years ago has lost 50% of its value.  This was due to declining rents and lack of tenants as so many businesses work out of their home today.  As a result, the owner of the building has decided to walk away from the building and let the bank have the property.  The owner just wanted to inform their tenant.  Aren’t you glad you’re not the owner.  BTW…Property was worth $80M 3 years ago and today its worth $40m and their loan is $40m.  OUCH!  Hope they did not personally guarantee that loan!


Real estate has its ups and its downs just like any industry, but working with people that understand the changing markets and adapt to those markets are the ones you want to work with.  If you have any need in Residential or Commercial Real Estate, please feel free to contact me.

All the Best,

Rob McCarthy
Senior Mortgage Advisor
650-465-8957 c
CA DRE #01165697  NMLS #121019
101 Loan – 14435 C Big Basin Way, Saratoga, CA 95070


  1. Residential Financing for Purchases and Refinances on 1 to 4 unit properties.
  2. Reverse Mortgage Financing to include Conforming, Jumbo, HELOC Jumbo’s.
  3. Commercial & SBA Financing to include Multifamily, Office, Retail and Light Industrial.
  4. Access to over 60 banks with over 300 “Five Star” Reviews on Yelp, Google and Linkedin.
  5. Over 30 years of lending experience with over $2b in closed loan volume.





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