Suffering an Unfair Job Loss is Tough, our california employment attorneys can help.

Mortgage Bankers Association Study Finds Record High Delinquency Among CMBS

September 7, 2010

As Irvine commercial real estate loan modification lawyers, we have followed reports on the health of the commercial real estate marked for some time. So we were interested to see a recent report on delinquency among the loans backing different sectors of commercial real estate. The information comes from the Mortgage Bankers Association, which released second-quarter delinquency and 30-days-overdue numbers Sept. 2. That report, as HousingWire noted, said delinquencies among loans held in commercial mortgage-backed securities are at their highest since the association started tracking them in 1997. The same was not true for the other two categories of CRE tracked in the report, Fannie Mae multifamily loans and ordinary bank & thrift CRE loans. A MBA spokesperson suggested that those two categories have reached a plateau.

CMBS delinquencies rose from 6.83 percent in the first quarter to 8.22 percent in the second, both of which are massive increases over the 3.91 percent for 2009 and 0.53 percent for 2008. The Atlantic's Daniel Indiviglio made a chart of the data and offered some analysis. He pointed out that the loans chosen for CMBS are typically those considered more likely to default, suggesting that a higher delinquency rate was always likely. He also said the CMBS data included earlier-stage delinquencies than the other two, suggesting that earlier delinquencies could be driving the spike in all delinquencies. If this is the case, he said, those delinquencies could indicate that the commercial real estate market is still struggling for a recovery. However, he cautioned readers that the three datasets are not directly comparable, in part because the CMBS data includes REO properties while the others do not.

As San Diego County commercial real estate loan modification attorneys, we would like to see a recovery in the CRE market (as well as the residential market). Thus far, however, the data seem to suggest that this is not a strong possibility. In addition to the occasional news of a CRE foreclosures and walk-aways, the rest of the economy has simply not improved in a way that allows rents to increase and office and retail spaces to fill back up. In fact, if Indiviglio is right about the early-stage delinquencies, many more foreclosures could lurk in late 2010 and next year. This is bad news for the original borrowers whose loans have been securitized, because modifying CMBS is unlikely to be any easier than modifying securitized residential mortgages. In both cases, investors are legally entitled to hold up a loan workout or other action because they have a financial stake in the outcome.

Despite this, Howard Law PC has had good luck modifying CRE loans on behalf of California clients. Our Newport Beach commercial real estate loan modification lawyers help clients negotiate with their lenders for a change in the loan that makes sense for everyone, including extensions to the due date and interest rate drops. Many CRE loans were made during the height of the CRE "bubble," which means their interest rates and principal amounts are much higher than the same properties would command today. As a result, many buyers are too far underwater to refinance, the usual strategy when a loan comes up for payoff or renewal. We negotiate with lenders for a solution we believe works better for everyone: a loan workout that allows the buyer to continue generating income and the lender to avoid foreclosing on a property that cannot repay its investment in the current market.

If you're in the market for a modification of your commercial loan, you should call Howard Law to learn more about how we can help. For a free consultation, contact us online or call 1-800-872-5925 toll-free.