- The length of the term. Most residential loans are for 30 years. Most commercial loans are short term 3, 5, or 7 years are common. If borrowers cannot refinance or pay off their loans, they either default or persuade lenders to extend their maturities. Right now 50-60% of properties failed to refinance within a few months of their maturity this year.
- When the loans were written and when they mature. A large number of loans with five-year terms taken out as property values soared and underwriting standards plummeted will come due during the next two years. More than $60 billion of the debt matures in 2011 and $80 billion in 2012, according to Bank of America.
- Late payments already occuring. Late payments on commercial real estate loans packaged into securities are at a record 7.5 percent, according to Moody’s, and may reach 11 percent by yearend.
"What this power is I cannot say; all I know is that it exists and it becomes available only when a man is in that state of mind in which he knows exactly what he wants and is fully determined not to quit until he finds it." Alexander Graham Bell
I am reading that more people with commercial properties are renegotiating their current loans and succeeding.
@Barbara- Interesting quote. Much better than come here Watson
@Harry - I've seen and heard antecdotal evidence of the same thing. When I read the article, link provided, I see the fact that 50-60% failed to refinance within a few months of their maturity. To me this implies that if it was easy or happening then why the delay, especially in this interest rate environment. Perhaps because the banks don't have HAFA to deal with they are being responsible and working out solutions with the borrower. Seems to me that it is pretty easy to negotiate. Do you want to write this off and push me into default or do you want to extend the loan, especially if they are making payments.
Love your blog and cool my first radio star to comment on this.
Comments(3)