Commercial mortgage defaults are poised to keep rising as loan modifications fail to prevent borrowers from running into trouble again amid collapsed real- estate values, according to Royal Bank of Scotland Group Plc.
“The re-default rate is going to be significantly higher than many market participants think,” Richard Hill, a debt strategist at the bank, said in an interview today at the Commercial Real Estate Finance Council’s convention in Washington. “For some of these loans that were modified in the past three years, the rubber is finally meeting the road.”
Borrowers are struggling to pay off debt with property prices down 34.5 percent from 2007 peaks and U.S. economic growth stalling. More than $30 billion of loans on everything from skyscrapers to strip malls are being handled by a so-called special servicer, according to data compiled by Bloomberg. The companies negotiate with delinquent landlords on behalf of bondholders and decide whether to modify a loan or foreclose.
Read more...Commercial Mortgage Repeat Defaults Poised to Increase, RBS Says - Bloomberg