$1.4 Trillion in Commercial Mortgages Due to Reset Next 4 Years
According to the February, 2010 Congressional Oversight Panel Report entitled: "Commercial Real Estate Losses and the Risk to Financial Stability", "Between 2010 and 2014, about $1.4 trillion in commercial real estate loans will reach the end of their terms. Nearly half are at present underwater – that is, the borrower owes more than the underlying property is currently worth". The Congressional report also stated that vacancy rates dropped 40% for office space and 33% for retail space. Commercial property values also have declined 40 percent since 2007!
Like the residential real estate crisis which occured when millions of subprime, adjustable-rate mortgages reached their reset period with many homeowners not being able to refinance, due to declining property values, the pending commercial real estate crisis will most likely follow the same path. Commercial mortgages originated during the real estate boom 5 to 7 years ago are reaching maturity with balloon payments coming due. The combination of lower commercial property values, decreased rental income and tightening lender underwriting guildelines could potentially cause a tidal wave of commercial mortgage loan delinquencies, defaults and foreclosures.
The Congressional Oversight Report also noted that large concentrations of commercial mortgages were originated by community banks during the early to mid 2000s. Due to increased competition from larger banks in the residential market, smaller regional and community banks began to increase commercial mortgage lending. This trend led to a greater risk exposure and a number of community banks have already collapsed as a result.
Since a large number of commerical property owners won't be able to refinance within the next 3 to 4 years when their loan matures, what are the alternatives to delinquencies and defaults, which will eventually lead to foreclosure?
Commercial Loan Workouts can help distressed commercial real estate. Commercial loan workouts are plans implemented by bank loss mitigation departments to provide solutions to delinquent commercial borrowers. The purpose is to keep profitable loans on the books and avoid dragging down their bottom line with high delinquency rates.
What can you expect with a commercial loan workout? The lender will offer payment arrangements or forebearance agreements which allows the borrower to become current, restructure existing mortgage terms, which is commonly called a loan modification. Modifying a commercial loan may include extending the reset period, reducing the interest rate and/or principal amount.
As the tidal wave of commercial mortgage loan delinquencies, defaults and foreclosures increase, banks and lenders are more willing to stem the tide by offering commecial loan workouts and commercial loan modifications to put borrowers back on track.
For more information, please click on link below: http://www.MyCommercialLoanWorkout.com
Like the residential real estate crisis which occured when millions of subprime, adjustable-rate mortgages reached their reset period with many homeowners not being able to refinance, due to declining property values, the pending commercial real estate crisis will most likely follow the same path. Commercial mortgages originated during the real estate boom 5 to 7 years ago are reaching maturity with balloon payments coming due. The combination of lower commercial property values, decreased rental income and tightening lender underwriting guildelines could potentially cause a tidal wave of commercial mortgage loan delinquencies, defaults and foreclosures.
The Congressional Oversight Report also noted that large concentrations of commercial mortgages were originated by community banks during the early to mid 2000s. Due to increased competition from larger banks in the residential market, smaller regional and community banks began to increase commercial mortgage lending. This trend led to a greater risk exposure and a number of community banks have already collapsed as a result.
Since a large number of commerical property owners won't be able to refinance within the next 3 to 4 years when their loan matures, what are the alternatives to delinquencies and defaults, which will eventually lead to foreclosure?
Commercial Loan Workouts can help distressed commercial real estate. Commercial loan workouts are plans implemented by bank loss mitigation departments to provide solutions to delinquent commercial borrowers. The purpose is to keep profitable loans on the books and avoid dragging down their bottom line with high delinquency rates.
What can you expect with a commercial loan workout? The lender will offer payment arrangements or forebearance agreements which allows the borrower to become current, restructure existing mortgage terms, which is commonly called a loan modification. Modifying a commercial loan may include extending the reset period, reducing the interest rate and/or principal amount.
As the tidal wave of commercial mortgage loan delinquencies, defaults and foreclosures increase, banks and lenders are more willing to stem the tide by offering commecial loan workouts and commercial loan modifications to put borrowers back on track.
For more information, please click on link below: http://www.MyCommercialLoanWorkout.com
Comments (4)
Unlike residential loan mods, do you see commercial workouts working out? If not we are likely to see a very serious problem in the making.
Account Closed, almost 15 years ago
I just sat through a seminar by the chief economist for Stewart Title. He estimates roughly only $400-$800M available in commercial funding, so a short fall in demand versus supply.
Ted Akers, almost 15 years ago
If you look at the Goldman Sachs report, the number is probably over $2 trillion.
Rick Tripp, almost 15 years ago
Good post here. Thanks.
Ted Akers, almost 15 years ago