Commercial Mortgage Defaults Slow in Second Quarter
Wednesday, September 01, 2010
Source: Globe St.
Globe St. reports: According to FDIC data from the second quarter, as well as quarterly bank filings, the second quarter default rate for commercial, non-multifamily mortgages increased by 9 basis points, from 4.19% in the first quarter to 4.28%. This was the smallest quarterly increase since the third quarter of 2007, noted Dr. Sam Chandan, Global Chief Economist of Real Capital Analytics and an adjunct professor at the Wharton School of the University of Pennsylvania. Quarterly rises in the default rate have been steadily decelerating over the past year, though the absolute rate of 4.28% remains at its highest level in over 18 years.
Dr. Chandan confirmed that while a slowing pace of new defaults is encouraging for banks, any “…further easing will likely depend upon economic and labor market conditions supporting an improvement in credit and stabilization of property fundamentals.” These immediate challenges, along with “…difficulties in meeting recurring principal and interest obligations during the life…”of loans stand in the way of long-term stabilization.
The default rate for multifamily mortgages fell in the second quarter to 4.16%, but remains 103 basis points higher than one year ago. The recent decline in multifamily defaults is the result of improving fundamentals, according to Chandan – the broader commercial market is lagging behind in these parameters. The headline decline in multifamily mortgage defaults was not felt equally by banks of various size, with the largest banks seeing the steepest decrease in new defaults. Smaller banks remain under the stress of more new defaults in the multifamily sector.
For the full report, containing Dr. Chandan’s outlook for the mortgage market, continue to the GlobeSt.com article.
View the full article on Globe St.: Commercial Mortgage Defaults Slow in Second Quarter
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