Nearly two-thirds of loans sold last year were performing loans. I expect non-performing loans to grab a higher percentage this year.
A case study showed one company had whole loan and subordinate debt sales consisted of $6.1 billion in performing and non-performing loans. 2010 was a more preemptive year with a number of lenders in subordinate positions, life companies, sold loans that they thought might be sub-performing or potentially non-performing.
Some foreign banks want to sell b-notes and mezzanine notes on large loans, to US investment banks but according to the data one-third of the performing loans sold were "preemptive maintenance," based on owners in potential bankruptcies or major tenants rolling out of properties.
Nearly $350 billion in commercial mortgages will mature each year, from this year through 2015 that add to more than $1.7 trillion, according to Donavon Ostrom, Capital Markets for Remington Capital.
Ostrom indicates said that special servicers hold nearly $90 billion or 12 percent of the commercial mortgage-backed securities universe with $65 billion in delinquent loans.
In 2011, we think we will be tallying some of the larger $50 [million] to $100 million assets where NOIs deteriorate immaterially, and also small-balance assets.
Other analysts, however, said CMBS transparency increases delinquency numbers, while banks can set up new loans to lower delinquency percentages.
Incoming-to-outgoing resolutions held a four-to-one ratio from 2008 to 2009, but that pace shifted closer to a one-to-one ratio. Despite the shift and some light at the end of the tunnel, the situation remains far from optimistic. We don't expect this problem to go away anytime soon.
Hospitality loans represent a large balance for many portfolio lenders with geographical locations reflecting weak housing markets, Including California, Nevada, Florida, Arizona and Texas. Even Ohio and Michigan assets came into special servicing in 2007 to 2008 as those market saw a downturn earlier with pull back in manufacturing jobs.
The weak housing market states showed most distress, but more distress was coming from the Northwest. Hospitality properties could head into distress, along with self-storage.
A receiver--a third-party who takes control of the party--could sell a property if the borrower agrees to it. Other than the price, there is no negotiation with a receiver, which leaves very few options like bankruptcy or Recapitalization for example.
With residential, some commercial situations involved borrowers who had a trader mentality rather than a long-term property operator approach, and borrowers were unable to put capital into a workout.
However a borrower willing to work out the loan can gain a win-win, as each transaction has an individual workout strategy or recapitalization solution.
"We have created a plan for recapitalization that if we work through this together, we are going to maximize our solutions for troubled owners, and we are going to help them protect whatever equity is remaining in the property." Shayne Fowler
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