Commercial mortgages at risk of default has quintupled

[Subdivisions]

You think sub-prime mortgages caused an economic nightmare? Well, then, don't go to sleep...

The volume of commercial mortgages at risk of default has quintupled since the beginning of 2008 as a deteriorating economy has made it increasingly difficult for shops and businesses to keep up with their payments.

Special servicers, companies that collect payments from borrowers in distress on behalf of mortgage bond investors, reported $23.7bn of mortgages under their care at the end of the first quarter, according to Fitch Ratings.

That was five times higher than the $4.6bn of mortgages needing special servicing at the end of 2007. Servicers experienced an almost 50 per cent increase in the volume of distressed commercial mortgages in the first quarter alone.

Mortgages for multi-family residential properties suffering from the housing downturn represented the largest share of the troubled loans at 31 per cent, said Fitch. However, mortgages for shops and businesses were catching up, with retail loans at 28 per cent of the distressed pools.

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“Commercial real estate is in a world of hurt and will be for at least the next two years,” said Ross Smotrich, analyst at Barclays Capital. “This is a capital intensive business in which lending capacity has diminished because of the absence of securitisation, while the fundamentals are driven by the overall economy so both occupancy and rents are declining.”

http://www.ft.com/cms/s/0/d5c7a272-3434-11de-9eea-00144feabdc0.html?nclick_check=1

http://www.azbiz.com/articles/2009/04/24/construction_real_estate/doc49f212da0b3c4427131772.txt">Option ARMs and Alt-A mortgage nightmare still to come

http://www.news10.net/news/story.aspx?storyid=58232&catid=2">Foreclosure "Tsunami" Threatens Business Owners - And this is just California. The problem is national in scope.

http://www.azbiz.com/articles/2009/04/24/construction_real_estate/doc49f212da0b3c4427131772.txt">Next potential mortgage crisis prompts call for 'housing czar' - "Foreclosures will be with us for the foreseeable future, with the highest foreclosure volumes anticipated to be in late 2010 and through 2011 when the five-year interest-only option ARMs and Alt-A mortgages reset, most of which will do so in 2010,” said John Strobeck, whose Bright Future Business Consultants tracks data for the new home building industry in Southern Arizona.

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Think we've seen the worst of our economic woes based on a bad news-happy DOW? Pfffft! We've only just scratched the surface! Wake up, quit being distracted, and prepare for the worst!