A Commercial Mortgage Crisis Not Necessarily So
SOURCE: Courant.com
As the subprime meltdown continues some worry that commercial mortgages may be in for the same ride. There are some major differences between the two types of loans which make a commercial mortgage crisis far less likely. One of the key points to note right now is that delinquency rates on commercial mortgages remain very low, and the risks aren't the same as with residential loans.
There are good reasons to think that the commercial mortgage crisis will not materialize. Actual delinquencies on commercial mortgage bonds were only 0.28% at the end of 2007. Even if that rates toes up, as it's expected to, it is nowhere close to the near double-digit default rates seen on subprime loans
Commercial loans require much more due diligence on the part of the underwriter. There are far more factors that are considered before a loan is issued. The "No Doc" loans that permeated the subprime fiasco are not remotely the norm for a typical commercial loan.
Read full report »
As the subprime meltdown continues some worry that commercial mortgages may be in for the same ride. There are some major differences between the two types of loans which make a commercial mortgage crisis far less likely. One of the key points to note right now is that delinquency rates on commercial mortgages remain very low, and the risks aren't the same as with residential loans.
There are good reasons to think that the commercial mortgage crisis will not materialize. Actual delinquencies on commercial mortgage bonds were only 0.28% at the end of 2007. Even if that rates toes up, as it's expected to, it is nowhere close to the near double-digit default rates seen on subprime loans
Commercial loans require much more due diligence on the part of the underwriter. There are far more factors that are considered before a loan is issued. The "No Doc" loans that permeated the subprime fiasco are not remotely the norm for a typical commercial loan.
Read full report »
