Market Update: Commercial Loan Defaults Reach Record High

Hey D.C. Here,

Delinquencies on commercial mortgage loans rose to a record in the third quarter as unemployment rose and landlords struggled to retain tenants. The percentage of Commercial loans at least 30 days past due rose to 4.06 percent from 1.17 percent a year earlier, the Mortgage Bankers Association said today. That’s the most since the group began tracking the data in 1997. About 3.43 percent of bank- owned loans on offices, apartment buildings, shopping centers and other income-producing properties were at least 90 days past due, up from 1.38 percent a year earlier, the MBA said.

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The loan delinquency rate for bank-issued commercial loans is the highest since the second quarter of 1994, when it was 3.49 percent. The Federal Deposit Insurance Corp (FDIC) has seized 130 banks since Jan. 1, the most since 1992, and faltering commercial property loans triggered the majority of bank failures. On Sunday’s training, I’m going to hand you a website on a silver platter where you can find these 130 banks that desperately need to sell their commercial properties and luxury homes in default.

"When there’s such a significant drop in employment, that has an impact on commercial office space," Higher vacancies and decreased rents makes the value of the property fall through the floor creating a great case for the lender to accept your short sale and a monstrous discount on the mortgage they’re holding. This creates huge opportunity for you as the value added investor. "When there’s a pullback in consumer spending, that has an impact on retail properties."

The delinquency rate will not improve until the unemployment rate drops and consumer spending revives. The U.S. unemployment rate fell 0.2 percent to 10 percent in November, the Labor Department reported Dec. 4. The most recent unemployment rate is the highest since 1983. Unemployment affects the values of commercial properties because commercial properties are valued based on their income, not comps like residential properties are.

Investors in commercial mortgage-backed securities faced the highest delinquency among loan holders in the MBA report, which covered CMBS debt as well as property loans held by life insurance companies, and government-controlled mortgage financiers Fannie Mae and Freddie Mac.

Delinquencies greater than 60 days on multifamily loans held or insured by Fannie Mae rose to 0.62 percent, up from 0.16 percent a year earlier. That’s a 400% increase! Delinquencies greater than 90 days on multifamily loans held or insured by Freddie Mac remained unchanged at 0.11 percent. Multifamily loans are backed by rental apartments.

Late payments on commercial real estate loans held by life insurance companies increased to 0.23 percent, up from 0.06 percent, the mortgage bankers said. "Life insurers, Fannie and Freddie are pretty conservative in their underwriting, which keeps delinquencies low."

Of a total $3.47 trillion in commercial and multifamily mortgage debt outstanding as of June 30, 50 percent was held by banks, 21 percent pooled in CMBS, 10 percent owned or guaranteed by government-backed enterprises, 9 percent held by life insurance companies and the rest by other government and private entities, the Mortgage Bankers Association reported.

Make sure you show up for Sunday’s training to find out how you can get your piece of this $3.47 trillion opportunity. The time is now. After you attend this training, you will see more opportunities with commercial foreclosures that you’ve never seen before because you didn’t know where to look.

There are only 17 seats left for this training and NOTHING WILL BE SOLD ON THIS TRAINING.

Get in HERE:

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Talk to you Sunday,

DC

P.S. On Sunday’s training, I’m giving you our secret source for finding local banks desperate to GIVE YOU their commercial short sales and REO’s.

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