LADERA RANCH, CA—As regulated lenders come under increased regulatory oversight and constraints, "shadow" banks and non-regulated lenders will be able to provide borrowers with access to other forms of capital, Money360's Gary Bechtel tells GlobeSt.com. As we recently reported, Bechtel has been hired as president of the firm. We spoke with him exclusively about his goals in his new role and trends in the lending environment.

GlobeSt.com: What are your goals in your new role with Money360? 
Bechtel: As a company, our goal is to make Money360 the number-one lender/preferred online financing source for both borrowers and investors in the commercial real estate finance industry. What differentiates us in the online marketplace is our team's deep expertise in the commercial real estate industry. Because of this, we offer borrowers the ability to confidently finance transactions under a variety of lending programs, including permanent, bridge and mezzanine loan structures. Our team also has strong technology experience, which we will use to continue to expand our technology platform and origination capabilities. Combined with additions to our back office, this allows us to offer a number of different investment opportunities to institutional and accredited investors and close on deals efficiently.

GlobeSt.com: What trends do you see emerging in the lending environment?

Bechtel: As regulated lenders come under increased regulatory oversight and constraints, "shadow" banks and non-regulated lenders like Money360 will be able to provide borrowers with access to alternative forms of capital. Beginning in 2016, increased reserve requirements and the addition of risk retention made by regulators within the CMBS industry will force many traditional institutions to limit their capability to provide their client with loans for the construction of new properties, refinancing of existing loans or any other forms of debt. These and other factors will enable companies like ours to offer alternative financing programs to fill this void. At the same time, it will offer investors that have traditionally not been able to invest in these higher-quality mortgages the opportunity to do so.  

GlobeSt.com: What strategies will lenders employ to get deals done if/when interest rates begin to rise?

Bechtel: If interest rates begin to rise, lenders will likely need to take a more conservative approach, especially if they believe that rates will continue to rise for some time. New loans will need to be stress-tested with reasonable assumptions to make sure that lenders are not overly exposed during the term of the loan. Loan-to-values and debt-coverage ratios may also need to be reduced as income streams may be impacted by a slowing economy, and values may decline. With the real prospect of interest rates increasing (and potentially capitalization rates also increasing, thereby driving down property values), current lenders may have a gap between their maturing loans and new debt achievable to the borrower. This may force lenders to either discount their outstanding position or offer some form of secondary financing. It may also force borrowers to either raise additional equity or take on "white knight" capital in the form of mezzanine or preferred equity within the partnership structure.

GlobeSt.com: What are the greatest challenges lenders face today in commercial real estate?

Bechtel: With all the capital currently available in the market today, we see a continued softening of underwriting and due-diligence standards, similar to the end of the cycle in 2007-2008. While most traditional lenders and mortgage bankers continue to maintain high-underwriting standards, and Money360 is as well, some new entrants will not follow that same pattern, which can put their end investors and borrowers at potential risk. This could ultimately impact the health of lenders' balance sheets and potentially lead to more stringent oversight of the commercial real estate finance industry and the marketplace lending and crowdfunding industry in particular.

GlobeSt.com: What are your goals in your new role with Money360? 
Bechtel: As a company, our goal is to make Money360 the number-one lender/preferred online financing source for both borrowers and investors in the commercial real estate finance industry. What differentiates us in the online marketplace is our team's deep expertise in the commercial real estate industry. Because of this, we offer borrowers the ability to confidently finance transactions under a variety of lending programs, including permanent, bridge and mezzanine loan structures. Our team also has strong technology experience, which we will use to continue to expand our technology platform and origination capabilities. Combined with additions to our back office, this allows us to offer a number of different investment opportunities to institutional and accredited investors and close on deals efficiently.

GlobeSt.com: What trends do you see emerging in the lending environment?

Bechtel: As regulated lenders come under increased regulatory oversight and constraints, "shadow" banks and non-regulated lenders like Money360 will be able to provide borrowers with access to alternative forms of capital. Beginning in 2016, increased reserve requirements and the addition of risk retention made by regulators within the CMBS industry will force many traditional institutions to limit their capability to provide their client with loans for the construction of new properties, refinancing of existing loans or any other forms of debt. These and other factors will enable companies like ours to offer alternative financing programs to fill this void. At the same time, it will offer investors that have traditionally not been able to invest in these higher-quality mortgages the opportunity to do so.  

GlobeSt.com: What strategies will lenders employ to get deals done if/when interest rates begin to rise?

Bechtel: If interest rates begin to rise, lenders will likely need to take a more conservative approach, especially if they believe that rates will continue to rise for some time. New loans will need to be stress-tested with reasonable assumptions to make sure that lenders are not overly exposed during the term of the loan. Loan-to-values and debt-coverage ratios may also need to be reduced as income streams may be impacted by a slowing economy, and values may decline. With the real prospect of interest rates increasing (and potentially capitalization rates also increasing, thereby driving down property values), current lenders may have a gap between their maturing loans and new debt achievable to the borrower. This may force lenders to either discount their outstanding position or offer some form of secondary financing. It may also force borrowers to either raise additional equity or take on "white knight" capital in the form of mezzanine or preferred equity within the partnership structure.

GlobeSt.com: What are the greatest challenges lenders face today in commercial real estate?

Bechtel: With all the capital currently available in the market today, we see a continued softening of underwriting and due-diligence standards, similar to the end of the cycle in 2007-2008. While most traditional lenders and mortgage bankers continue to maintain high-underwriting standards, and Money360 is as well, some new entrants will not follow that same pattern, which can put their end investors and borrowers at potential risk. This could ultimately impact the health of lenders' balance sheets and potentially lead to more stringent oversight of the commercial real estate finance industry and the marketplace lending and crowdfunding industry in particular.