The collapse of Silicon Valley Bank accelerated the retreat further, pushing regional lenders to tighten deposit requirements, reduce facility sizes, and lower leverage. However, for commercial mortgage brokers, that pullback created an opening.
Robert Trent (pictured top), CEO of Builders Capital, led one of the largest builders in Washington state. He now runs a private lender that has been working to fill the gap the banks left behind.
“The banks are really retreating from the space,” Trent told Mortgage Professional America. “They’re decreasing leverage they’re offering to homebuilders, they are increasing deposit requirements, they’re decreasing the size of the facilities they have. And essentially, the homebuilders are scared or concerned that the banks aren’t going to continue to be there in a meaningful way for them to capitalize their homebuilding needs.”
Changes after the financial crisis
Trent said the relationship between banks and private lenders in the construction space has flipped entirely.
“We used to be an overflow — their primary source of capital was the banks, and we were an overflow as a private lender to them,” he said. “The inverse is now happening where they’re asking for us to finance a lot more and have the banks as their overflow or backup plan.”
