Definition of "Commercial banks"

The largest financial intermediaries directly involved in the financing of real estate. Commercial banks act as lenders for a multitude of loans. While they occasionally provide financing for permanent residential purchases, commercial banks primary real estate activity involves short term loans, particularly construction loans ( typically 6 months to 3 years ) and to a lesser extent home improvement loans. Most large commercial banks have a real estate loan department; their involvement in real estate is through this department. Some of the largest commercial banks are also directly involved in real estate financing through their trust departments, mortgage banking operations, and real estate investment trusts (REITs). All commercial banks are either federally (nationally) chartered or state chartered. National banks are chartered and supervised by the U.S. Comptroller of the Currency. The word "national" appears in their title, and they are members of the Federal Reserve System (FRS). However, only 1/3 of all commercial banks are members of the FRS, even though the member banks control the majority of total bank assets. Nationally chartered banks are also required to maintain membership in the Federal Deposit Insurance Corporation (FDIC). Federally chartered banks can make real estate residential loans up to 90% of the appraised value with a maturity of not more than 30 years. However, any government insured or guaranteed loans are exempt from these limitations. State chartered banks are regulated by various agencies in their particular state, and membership in both the FDRC and the FRS is optional. Banks not members of the FDIC are normally required to maintain membership in a state insurance corporation.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

See concrete block. ...

Valuation method for land or improvements to property. It takes into account gross rentals less operating expenses. ...

The term compounding refers to the process of gaining interest on interest. While usually, interest is credited to the existing principal amount, compounding makes it possible to credit ...

A society of real estate professionals providing a counseling service on real estate purchase and investment decisions through a negotiated fee rather than charging a commission. ...

Sewer system built into the streets of a neighborhood that is capable of accommodating the excess water flow of a heavy storm without backing up or flooding. ...

Interest computations based only on the original principal. For example, the simple interest on a $100,000, 8% loan is $8,000. It is compared with compound interest which is applied to the ...

Distance from the location of natural ground and water to the actual ground level. ...

A real estate owner's policy and rules regarding the use of the property by the tenant. In insurance, a contract that provides coverage against given risks. Coverage limits for real ...

(1) The interest rate used to convert future receipts or payments in connection with real estate property to their present value. The cost of capital is used as the discount rate under the ...

Popular Real Estate Questions