See below for an introduction to my post on the latest Deutsche Bank CMBS Report. On July 29, Deutsche Bank issued a report on the state of Commercial Mortgage Backed Securities (CMBS's)- and their impact on banks.
The conclusions:
*Deliquency rate is now 4.1%, triple what it was six months ago. PAce increasing faster than in the early 90's.
* DB expects deliquency rates to soar over the next two years, perhaps 5-6% by next year. With non-stabilized loans, like Stuy Town discussed in the intro post below, driving a lot of the deterioration. Interest reserves are becoming depleted for these non-stabilized loans.
* Resetting interest-only loans are also a problem, as the average increase in debt service is 20%+, according to DB.
* Later vintage loans are the worst, particularly 2006-2007, as the market was at its peak froth. Loans from 2002-2004 were based on much lower acquisition prices and far fewer are in trouble. 2005 is not quite as bad as 06.
*According to Rchard Parkus, $2 trillion in commercial loans are resetting in the next 4 years; he expects a large portion to have trouble qualifying for refinancing.
The conclusions:
*Deliquency rate is now 4.1%, triple what it was six months ago. PAce increasing faster than in the early 90's.
* DB expects deliquency rates to soar over the next two years, perhaps 5-6% by next year. With non-stabilized loans, like Stuy Town discussed in the intro post below, driving a lot of the deterioration. Interest reserves are becoming depleted for these non-stabilized loans.
* Resetting interest-only loans are also a problem, as the average increase in debt service is 20%+, according to DB.
* Later vintage loans are the worst, particularly 2006-2007, as the market was at its peak froth. Loans from 2002-2004 were based on much lower acquisition prices and far fewer are in trouble. 2005 is not quite as bad as 06.
*According to Rchard Parkus, $2 trillion in commercial loans are resetting in the next 4 years; he expects a large portion to have trouble qualifying for refinancing.
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