Realtors Renew Proposal for Pooling Commercial Loans

The National Assn. of Realtors said Friday that it wants to help set up a secondary market for commercial mortgages that would bring fresh cash to the industry.

“The industry is desperate for new sources of funding,” Harley Rouda, the trade group president, said in a statement.

A crackdown on bank lending, particularly in the overbuilt office, hotel and retail market, has left many developers without access to financing.

Some economists say the reluctance to lend is putting the brakes on the economy even as the Federal Reserve Board pushes interest rates down.

Although the commercial real estate industry has been mulling the idea of a secondary market for several years, the new push could bring it a step closer to reality.

Rouda said the market would be modeled after the highly successful secondary market in residential mortgages, in which lenders pool notes and sell them as securities.

The sale of the mortgages takes them off the financial institutions’ books and provides them with fresh capital.

The pooling of mortgages also significantly reduces the risk associated with home loans, so investors are willing to put cash into them and more money thus is made readily available.

Rouda said the commercial mortgage market lacks the liquidity that exists in the secondary market for residential mortgages.

“By providing a stream of mortgage capital, the secondary mortgage market kept home mortgage funds flowing when the thrift industry collapsed. This same type of continuity is needed for commercial mortgages,” he said.

The secondary residential mortgage market also enables homeowners to pay lower interest rates because it brings more money into the market and that pushes prices down.