Between a Rock & a Hard Place

Here are the Highlights:

  • Speed of deterioration in loan performance is unprecedented, even with
    relative to early 1990s
  • Total delinquency rate reached 4.1% in June, 2.2 times higher than in March
    and 3.5 times higher than December
  • Delinquency rates likely to soar higher over next 24+ months on billions of
    dollars of pro forma loans that never stabilized and resetting partial IO loans
  • With 2,158 delinquent fixed rate loans ($27.9 billion) special servicers may
    soon be overwhelmed
  • DB CMBS Research projects term losses will reach 4.3-6.3% for the
    outstanding CMBS universe ($31.3-$46.4 billion), and 8.4-12.1% for the 2007
  • Massive maturity default risk
  • 64.4-72.5% of loans (400-$450 billion) would not qualify to
    refinance were they to survive until maturity
  • With well over $2 trillion in commercial mortgages maturing between now and
    2013 in CMBS, banks and life company portfolios, the scale of the potential
    problem is formidable
  • These problems are not the result of dislocated financing markets, rather they
    reflect the simple fact the majority of loans do not qualify for a loan large
    enough to retire the existing debt
  • Improvements in rents and vacancy rates are extremely unlikely to be
    sufficient to materially affect the scope of the problems

For the full report, click here.