NEW YORK, Feb 20 (Reuters) - If you are a developer looking for money to finance construction of a big office building or you need to refinance a mortgage for a well-known commercial tower, chances are you will have a tougher time getting that loan. And if you do get the cash, you'll pay more because borrowing costs have risen in the wake of Sept. 11 due to uncertainty related to terrorism insurance. Real estate developers, insurance companies and Wall Street have pressed U.S. Congress and Senate for legislation that would provide aid or funding to insurance companies in the event of catastrophic property damages from terrorist attacks. ``For any trophy property or property where you have tenants who are potential targets you will probably have reticence from lenders,'' said Lisa Pendergast, analyst at Greenwich Capital Markets Inc. ``Since Sept. 11, there are fewer financing options and less liquidity. If I wanted to get financing for a big tower, insurance costs will be higher,'' said Darrell Wheeler, commercial mortgage backed (CMB) securities analyst at Salomon Smith Barney. ``Terrorism insurance is available, but more pricey. If you price a large building to a worst case scenario, the insurance is unavailable because it could conceivably be the cost of a building.'' Just a year ago, loans to a single borrower often for a single property were all the rage among commercial real estate lenders like insurance companies, large banks and Wall Street broker dealer firms. TOUGHER APPROVAL PROCESS Today, loan officers for these lenders will have a tougher time getting approval from their internal credit committees for such deals because they are are not sure if they can readily resell the loans they underwrite. Wall Street firms, banks and insurance companies bundle their loans into securities known as commercial mortgage backed securities. Selling such securities backed by a single trophy property has become difficult. Properties included in these commercial mortgage bonds backed by a single property included the World Trade Center's two towers and Seven World Trade Center - all structures that were destroyed in the Sept. 11 attacks. While 80 percent of the commercial mortgage bond market is made of securities pooling loans for a wide mix of properties, usually smaller loans, investors are wary of buying bonds backed by a single property. They are cautious because the principle and interest payments on these single property-backed securities could be interrupted by a terror attack if they have no terrorism insurance. ``I'm staying away because of terrorism insurance uncertainties. There are enough other opportunities in the bond market so you need not chase that,'' said Colin Lundgren, portfolio manager at American Express Asset Management. That reluctance among investors is evident in the risk premium paid out to bond holders known as spreads. Spreads for commercial mortgage bonds backed by single properties widened on the heels of the Sept. 11 attacks. ``These wider spreads have slightly hurt investor returns, but more importantly they have significantly reduced available financing for large property development,'' said Wheeler. WIDER SPREADS For example, a AAA-rated commercial mortgage bond backed by a mortgage for New York City's Rockefeller Center was trading at a spread of 58 basis points over swaps when the deal was sold in May of 2001. Today, that spread has widened 25 basis points to a spread of 83 basis points over swaps and dealer firms likely won't readily make a market for these securities. These securities, said market players, will trade by appointment which means that dealers will only buy them from investors if they can readily resell them. These wider spreads, said Pendergast, have likely translated into higher financing costs for borrowers. ``The higher financing costs reflect the more expensive execution in the secondary markets,'' she said. So, faced with a gummed-up finance machine, the real estate world has launched a full court press lobbying effort to get U.S. lawmakers to adopt some cushion for insurers. According to research published by Wheeler, some real estate finance professionals are recommending federal government involvement. One potential solution would be the adoption of a system similar to Britain's national reinsurance pool that was adopted in the early 1980s in response to terrorism. Such a pool, Wheeler noted, ``could be self funding, but have the support of the Federal government.''