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Private Data Firm Finds Delinquency Rate for CMBS Hit Historic High in April

May 5, 2010

Our Riverside commercial real estate loan modification attorneys wrote recently about a report that commercial mortgage-backed securities are likely to default in record numbers this year. The private data firm Trepp LLC has just come out with a report bolstering that grim prediction using data from this past month. National Real Estate Investor reported May 4 that April saw a delinquency rate of 8.02% among CMBS, according to Trepp. That number is a massive increase from April of 2009, which saw a delinquency rate of 2.45%. CMBS, like residential mortgage-backed securities, are investments in "bundled" real estate loans, but the loans are higher in value because they represent commercial buildings.

The article said the jump in delinquent CMBS was actually not as steep in April as it was in March. However, nearly half of the basis points used to determine March's delinquencies can be attributed to the default on the loan for Stuyvesant Town, a massive New York City development whose default was widely reported. The 8.02% number includes loans that are REO, in foreclosure or at least 30 days overdue. However, the article also broke down the rate of loans that are "seriously delinquent" because they are more than 60 days overdue. That default rate was more than 7% in April, the article said, up sharply from 1.78% in April of 2009 and 3.91% six months ago. The sector of commercial real estate with the highest delinquency rate was lodging, which had a 17.16% default rate this year and a 2.63% default rate a year earlier.

As San Bernardino commercial real estate loan modification lawyers, we're not surprised to see that lodging is suffering so much. In a recession, hotels and the travel industry will inevitably see fewer customers because individuals have less money to spare. However, the problems in commercial real estate extend to every type of building mentioned in the article, all of which had a delinquency rate above 5% and well above their rates from a year before. In the bad economy, even office and apartment buildings aren't always able to make enough money to pay off their loans, especially loans made at the height of the commercial real estate bubble. This is bad news for everyone, because the crash of the commercial real estate market may well take small banks with it, as lenders and investors lose the money they poured into commercial buildings during better times.

Howard Law PC helps commercial investors in tight spots negotiate modifications to their commercial loans, a move that can help them avoid default and foreclosure. Like residential borrowers, commercial borrowers are locked into pricey loans they committed to at the top of the market, and are now finding that lenders are not interested in modifying those loans. Unlike residential borrowers, commercial borrowers can't simply wait it out, because their loans come due in a handful of years, not over several decades. Our Los Angeles County commercial real estate loan modification attorneys help borrowers convince lenders that modifying a loan is in everyone's best interests, allowing the lender to maintain its investment and avoid taking a huge loss at the bottom of the market.

If you have a commercial property that's in danger of default and you know you need help negotiating with the lender, you should call Howard Law today. To learn more at a free evaluation of your case, send us a message through our website or call 1-800-872-5925 today.