Community banks are feeling a lot of pressure right now from the government to begin lending again, Sheridan notes. "In some cases they have the deposits to do that, they feel comfortable beginning to lend again and they don't have a commercial real estate loan concentration," he says. "But several bank CFOs have begun to wonder, how do they not stuff their balance sheets again with bad assets while doing the thing they're meant to do, which is serve their community?" The answer, Sheridan believes, is by quickly selling those loans on a marketplace such as DebtMarket.
According to Sheridan, however, while many community banks have accumulated a disconcertingly high concentration of commercial real estate, very little trading of residential and commercial mortgages is occurring. "Over the next 18 to 24 months, half of the $3 trillion in existing commercial mortgages will need to be refinanced and probably won't qualify," he contends. "That's going to cause problems if [institutions] are not aggressive on their write-downs. We're seeing a lot of activity as people begin to test the market for loans on their balance sheet as well as debt they're originating now that they may not want to leave on their balance sheets."