US commercial property loan defaults soar-reports

US commercial property loan defaults soar-reports

* Commercial real estate bank-loan defaults hit 3.4 pct

* Real estate bank loan defaults may peak at 5.3 pct

* CMBS defaults reach 4.01 pct in October

* CMBS defaults could top 8 pct in 2010

By Ilaina Jonas

NEW YORK, Nov 30 (Reuters) - The default rate for commercial real estate loans held by banks reached the highest in 16 years and the outlook looks worse, according to a report by a research firm released on Monday.

The picture for loans underlying commercial mortgage-backed securities looks as bleak, according to another report.

The national default rate for commercial real estate mortgages held by banks and other depository institutions reached 3.4 percent in the third quarter, up 0.52 percentage point from the second quarter, according to research firm Real Estate Econometrics.

It was the largest one-quarter increase since quarterly data became available in 2003.

At 3.4 percent, the U.S. default rate for commercial real estate mortgages -- on office, industrial, hotel and retail properties -- held by banks, thrifts and other depository institutions was the highest since 1993, when the default rate was 4.1 percent.

The default rate is the percentage of loans on a dollar basis that are past due 90 days or more or that are in non-accrual status, meaning lenders don't expect to be repaid in full, according to Real Estate Econometrics.

For apartment buildings, the default rate was reached 3.58 percent, up from 3.14 percent in the second quarter. The default rate on multifamily mortgages also has more than doubled over the last year.

Real Estate Econometrics Chief Economist Sam Chandan said commercial real estate lending should not be generalized.

"Don't say it's a regional bank problem," he said. "The conditions of each bank need to be evaluated on their own merit."

Some banks that had large exposure to commercial real estate are not suffering because they had strong risk management practices, conservatively analyzed loans and had in-place structures that hold someone accountable for the loan.

The balance of bank-held commercial mortgage loans 90 days or more past due rose to $4.4 billion in the third quarter from $3.5 billion in the second. Continued.


http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNe...

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Comment by Jeff on December 2, 2009 at 6:12am
I'll agree with Brokensheep in that Bob Chapman has avoided time-line predictions for years but his most recent post gives dates galore and the predictions aren't good for the coming year.

I don't believe the dollar will crash. Of course defining 'crash' would be helpful. The US will have to ease in inflation because they can't pay their debts any other way. Inflation could easily consume a substantial portion of overall global US debt. I suspect that might happen by the end of 2010 but a complete dollar crash is highly unlikely.
Comment by youhavetoforgiveme on December 1, 2009 at 5:10pm
Here we go! Once they publish the numbers (real or imaginary) after the close of this quarter (4th '09), it's going to get even more....interesting.... The published numbers will be a lie, but the reality is that commercial foreclosures will multiply, creating another financial crisis.

This could be the start of things getting really ugly....

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