Non-performing commercial mortgage-backed security loans and CMBS loans that are approaching maturity will have difficulty securing a workout or refinancing despite today’s historic low interest rates. Underwriting standards are more stringent today than when most CMBS loans were originated and net operating income has, for the most part, not recovered to pre-crisis levels. As a result, many CMBS loans that were originated at the height of the market leading up to 2007 will require significant additional equity to be refinanced or face foreclosure or having their note sold on the secondary market unless a loan modification can be negotiated with the special servicer.
CMBS maturities that fail to qualify for refinancing will remain at elevated levels for the next five years as a result of high issuance volumes leading up to the financial crisis in 2008.
Read more...Guest Column: CMBS Loans and the Special Servicer – Resolving Defaults | Commercial Property Executive