New rates posted today with minor fluctuations, with banks and conduit lenders showing little signs of loosening their extra conservative capital market strategies. Apartment loans are still receiving some funding. We'll keep you posted.

Source: LA Times

According to this recent article from LA Times, delinquencies are snowballing on construction loans and mortgages for office buildings, malls and apartments. The trend is particularly worrisome in Southern California.

The slumping market for commercial real estate -- viewed by many as the next big shoe to drop on the economy -- now threatens to drag down regional banks as they struggle to collect on loans made against shopping centers and office buildings.

Seriously overdue loans against commercial developments have shot up dramatically in recent months, as delinquencies snowball on construction loans and mortgages for office buildings, malls and apartments.

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Source: The Motley Fool

With the banking stress tests now completed, investors are finding it more sensible than it's been in months to invest in banks. Clarity, they'll tell you, is returning to the industry. We can now make informed estimates as opposed to the blind guesses we were stuck with in months past. Not only do we have a roadmap of a bank's future, but heck, the stress tests prove that no big bank will completely bellyflop and go under, right? Kinda. Sorta. Not really.

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Source: SF Gate

Another wave of real estate defaults is rapidly gathering strength - this time in the office sector.

Owners of several small commercial buildings in San Francisco already are behind on payments, and local industry observers are laying odds on which large property could be the first to be seized by a lender.

The mix of industries in San Francisco might make it better fortified than places like Manhattan, where the commercial sector is sharing the fate of the ravaged financial services industry, said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley.

"But we're not immune," he said. "San Francisco will lose 30,000 to 40,000 jobs this next year. That's a big number, and vacancy rates are going up, no doubt about it."

Two distinct but intertwined problems face owners of office buildings.

First, the lower occupancy and rental rates mean it's increasingly difficult for landlords to make their debt payments, forcing more and more to default - and some into foreclosure.

Second, tighter underwriting standards, declining cash flow and plummeting asset values mean that many of the loans coming due will be impossible to refinance without substantial equity injections.

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Source: Wall Street Journal

In the worst-case scenario, federal regulators examining the 19 largest U.S. banks are projecting losses of up to 12% on commercial real-estate loans over two years, according to a document viewed by The Wall Street Journal.

The regulators are likely to cite commercial-property debt problems as a major reason why at least some of the large banks need additional capital.

Such losses likely would cause even deeper misery, and risk of failure, at small and medium banks because they tend to have disproportionally more exposure to commercial real-estate loans than giant institutions.

Analysts already had been forecasting hundreds of bank closures in the next five years. The stress-test assumptions, including a 10.3% jobless rate at the end of 2010, raise the specter that some of the failures could occur sooner.

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