Commercial real estate…


Dave is a part-time blogger that writes about whatever suits him at the time.

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2 Responses

  1. Nora says:

    I agree when you say the commercial mortgage will not improve if we dont have some measure. Great PostReport

  2. Art Deco says:

    What Sheila Bair said was that she expects commercial real estate loans to be a larger component of bank losses in the future, which says something about the source of threats but not the over-all level of threat. If you examine the Federal Reserve statistics, you see that commercial banks are carrying $1.7 tn of commercial real estate loans on their books. Banks are also carrying $2.1 tn of residential real estate loans. The charge-off and delinquency rates of the two sorts of loans are quite similar and Case-Shiller and other indices show the price dynamics of the two sorts of loans have been similar in recent years. It is somewhat perplexing that this is being written about as a novel problem. Perhaps mortgages on commercial properties are more likely to be abandoned when the borrower is underwater (as is the case with residential mortgages on investment properties). OTOH, there are per the Wall Street Journal some $700 bn in outstanding mortgage-backed securities derived from commercial real estate loans v. more than $4,000 bn on residential real estate loans. It is a smaller problem, and banks have more discretion on loan modification and recycling the loans, &c.Report