No Credit Means Businesses Face Default
Commercial credit remains almost impossible to get, even for well-qualified borrowers.

According to New York Democratic Congresswoman Carolyn Maloney, who spoke before a Congressional Oversight Panel this week, "Access to commercial credit is absolutely frozen."

Unlike residential real estate loans, commercial real estate loans don't usually require repayment of the principal loan balance and the repayment period is much shorter. As the deadline for repayment nears, borrowers typically refinance. If they can't refinance, then they are forced to default.

Richard Parkus, head of CMBS and ABS synthetics research at Deutsche Bank Securities Inc., says two-thirds of outstanding loans packaged into commercial mortgage-backed securities could face trouble refinancing in the next few years. Those loans are worth a total of about $400 billion, he estimates.

Source: The Associated Press, Stephen Bernard (05/28/2009)

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