A Commercial Mortgage Crisis Is Unlikely
SOURCE: Courant.com
Even though the delinquency rates on commercial mortgages remain very low and the risks aren't the same as with residential loans, market pricing is showing a lot of fear. Things aren't as ominous as some investors feel.
There are good reasons to think that the commercial mortgage crisis will not materialize. Actual delinquencies on commercial mortgage bonds were only 0.28% at the end of 2007. Even if that rates toes up, as it's expected to, it is nowhere close to the near double-digit default rates seen on subprime loans
Not only that, the loans backing commercial properties are felt to be less risky than the subprime mortgages which often didn't require borrowers to show documentation or were given with low credit scores. Because commercial loans are underwritten based on financial statements, rent rolls and site visits, there is considerably more due diligence done.
Read full report »
Even though the delinquency rates on commercial mortgages remain very low and the risks aren't the same as with residential loans, market pricing is showing a lot of fear. Things aren't as ominous as some investors feel.
There are good reasons to think that the commercial mortgage crisis will not materialize. Actual delinquencies on commercial mortgage bonds were only 0.28% at the end of 2007. Even if that rates toes up, as it's expected to, it is nowhere close to the near double-digit default rates seen on subprime loans
Not only that, the loans backing commercial properties are felt to be less risky than the subprime mortgages which often didn't require borrowers to show documentation or were given with low credit scores. Because commercial loans are underwritten based on financial statements, rent rolls and site visits, there is considerably more due diligence done.
Read full report »
