According to a recent article in Reuters: sometime in December 2015, U.S. banking regulators put in writing their clear intent to keep a closer watch on underwriting standards in Commercial Real Estate lending.

The statement, issued by The Fed’s Board of Governors, the FDIC and the Office of the Comptroller of the Currency accused lenders of ‘increased (underwriting) policy exceptions and insufficient monitoring of market conditions.’

The agencies’ concern seemed to especially focus on “analyzing a borrower’s ability to service all of its debts during a period of rising interest rates”

I can tell you this is palpable as I’ve recently spoken to various lenders about different loan scenarios.

‘Post close reserves’ and ‘Global Debt Service’ (sufficient cash flow across all of an investor’s properties and his consumer debt) are lately receiving increased scrutiny.

The end of lending as we know it? Nah.

The end of ‘common sense underwriting?’ Nope. But certainly a sign that higher rates and the attendant strains are coming.

Ironic that after a seven year prescription of ‘accommodative policy,’ the Fed has misgivings about side effects.