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Briefing

United States: Commercial Real Estate Loans and Mortgage-Backed Securities (CMBS)

Appears in: Advanced Economies, North America, Finance and Banking, United States, Commercial, Real Estate, Real Estate and Mortgage Finance

Critical Issues

Background:

The delinquency rate on about US$700 billion in securitized loans backed by office buildings, hotels, stores and other investment property has reached previous peaks. Treasury reports that according to Fed estimates, US$500 billion of commercial mortgages are to mature in 2009, with the majority of those mortgages held by commercial banks. Foresight Analytics estimates the U.S. banking sector could suffer as much as US$250 billion in commercial-real-estate losses in this downturn. The Insurance sector is one of major investors in commercial real estate. The research firm projects that more than 700 banks could fail as a result of their exposure to commercial real estate. Industry lobbied to include legacy assets in TALF against 5-year maturity loans compared to 3-year common TALF loans. Fed agrees but requires larger haircuts for legacy term loans.

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Associated Readings

Analysis Federal Reserve Jon D. Greenlee Nov 03, 2009 Residential and commercial real estate

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